Home & Family Finance
Granting Financial Power of Attorney
/ May 17th, 2019
Power of attorney (POA) is the ability of an attorney-in-fact, or agent to act on behalf of a person (principal) who grants the agent authority to do so. At signing, both parties must be over 18 and mentally competent. Power of attorney can be tied to specific transactions, limited to the duration of a condition, or wide ranging and enduring.
Limited powers of attorney are granted, for example, when someone who cannot be physically present for a house sale, designates special POA for that transaction only. Enlisted military personnel often grant general financial powers of attorney to spouses, parents, or others while they are deployed. These powers end when the named transaction is complete or when the triggering condition no longer exists. Be sure to submit proper forms or include the necessary language to end the agent’s role automatically.
Some people grant ongoing financial POA. POA that does not limit the number of transactions and does not specify an ending circumstance is known as durable power of attorney.
Agents granted POA for specific tasks are typically paid. Set a fee and include it in the contract. People granted general durable power of attorney when principals are unable to manage their own affairs are often family members or friends who do not expect compensation.
Durable financial POA allows the agent access to accounts, grants the agent ability to make financial decisions, and authorizes the agent act on the principal’s behalf in business and legal matters. Agents have a duty to act honestly and for the principal’s benefit. They should keep detailed records of everything done on the principal’s behalf and may not mix the principal’s finances with theirs.
In some states POA agreements are durable by default until the death of the agent or principal. In others, duration must be stipulated. Some financial institutions want customers to sign their own POA forms. Ask your financial institutions what they require to honor your preferences.
It goes without saying that the agent you pick should be trustworthy. Professionals should be licensed and able to withstand scrutiny. Agents chosen from among people you know should be honest and dependable, and should have the skills to handle the responsibility. Couples should consider granting each other durable POA so that if one becomes incapacitated, the other can handle their financial affairs and make decisions about joint property.
Some sites offer free POA forms online. While they may contain useful information, it’s safer to consult a lawyer or a reputable local organization to help craft your POA agreements. Check the laws in your state, clarify your goals, and structure your agreements accordingly.