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4 Reasons to Consider Financial Power of Attorney

Each state has its own rules about who a court will designate to make financial decisions for you if you become unable to, either physically or cognitively.  Signing a Financial Power of Attorney document appointing someone you trust is the best way to avoid having a judge appoint someone for you.

A power of attorney is a document by which a “principal” (the person who signs the document) gives another person, (the “attorney-in-fact” or “agent,”) authority to act on behalf of the principal.

4 Things Someone with Power of Attorney Can Do for You

Typically, powers of attorney authorize the agent to carry out financial tasks such as:

  • Signing the principal’s checks.
  • Dealing with his or her assets.
  • Investing his or her money.
  • Generally handling his or her financial affairs.

Today, virtually all financial POA documents are durable which means they survive a person’s incapacity..

3 Important Questions to Consider Before Signing a POA Document:

Gift-Giving Power

Can your POA give away your money? Can he pay himself for his services as POA? Some powers are so sensitive that they cannot be exercised unless they are specifically spelled out in the document. The most common example of this involves gift giving. Do you want your POA to continue to give your children $100 on their birthdays? If so, spell out the power, who the recipients can be, and what dollar limit applies to gifts. What if one of your children is the person serving as your POA? Can he make one of those gifts to himself? Agents are generally prohibited from making gifts to themselves. So if your child-POA is to be a permissible recipient, the POA document must expressly say so.

POA Compensation

Generally POAs are friends or family members and are not paid for their services. However, to reduce the burden on family or friends, or to provide an incentive to the POA to continue serving, you may wish to provide for payment for the POA’s services. If you choose to pay someone, the terms for the payment must be stated within the body of the document. Otherwise the rules against “self-dealing” would apply and any payment by the POA to the POA would be prohibited. These rules apply to family members as well as professionals who serve as POAs.
When Does the POA Become Effective?
Modern POAs are usually effective immediately upon execution, even though the intention is that they would be used only in the event of the individual becoming incapacitated. You can state in your POA that you want the POA to be “springing,” which means after some specific event/situation occurs.

Final Advice

Different states have different witness and notary requirements. The individual appointed to serve as Power of Attorney has a legal fiduciary duty to act on your behalf and can be held liable in court for violating that obligation. Consequently, it is very important to choose someone you trust; you should also name a back-up or successor POA in the document in case something happens to your first choice.  You can answer the question “Who will sign your checks?” if ever you cannot.  Make your own choice and plan ahead.

By: Buckley Ann Kuhn Fricker J.D., GCM, President of Buckley’s For Senior LLC

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"Signing a Financial Power of Attorney document appointing someone you trust is the best way to avoid having a judge appoint someone for you. "

Ensuring Financial Responsibility

  • Always sign two or more original Financial POA documents.
  • Be sure to name Successors in case your original appointee cannot act.
  • After signing the POA, take it to the bank to be pre-approved for when it is needed.
  • Call your investment companies right away because they often have their own POA forms to fill out as well.
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