Financial Power of Attorney

The document appointing a person to manage your affairs when you are unable is called a power of attorney. The primary people named in a power of attorney are:

• Principal - the person creating the Power of Attorney document.

• Attorney-in-fact - the person receiving the power to act on behalf of the principal.

• Third-party - a person or institution the attorney-in-fact is working with on behalf of the principal. Examples include: banks, accountants, medical staff

Types of Powers of Attorneys

Limited power of attorney - "limits" the attorney-in-fact to specific tasks listed in the document. A typical use would be when the principal is traveling out of the country and needs someone to handle a certain task while the principal is away.

Durable power of attorneys allow the PoA to continue acting during an incapacitation.

General power of attorney - allows the attorney-in-fact to undertake almost any action on behalf of the principle. If the attorney-in-fact is unsure whether a specific act is allowed, the attorney-in-fact should contact an attorney.

A limited power of attorney or general power of attorney cannot act during an incapacitation unless the document is a "durable" power of attorney. Language in a durable power of attorney states the powers given to the attorney-in-fact shall continue if the principal is incapacitated and unable to make decisions.

Attorney-in-fact basics

The attorney-in-fact is not required to take the job, but once he or she accepts, the attorney-in-fact has a fiduciary responsibility to act in the best interests of the principal.

The attorney-in-fact can legally be held liable for his or her actions.

Any competent person 18 years or older may be appointed as an attorney-in-fact, but make sure your candidates are trustworthy and knowledgeable to avoid undesired consequences.

While an attorney-in-fact cannot change a will or trust, an attorney-in-fact can change beneficiaries on life insurance, IRAs, bank accounts and other assets with beneficiaries.

{Tip: to reduce liability when signing as an attorney-in-fact, include "- as attorney-in-fact for John Smith" after your name}

Power of attorney obstacles

Some institutions, to protect themselves from liability, may initially refuse the power of attorney document provided by an attorney-in-fact. The institution may require the attorney-in-fact to sign an affidavit stating that the power of attorney is valid. The attorney-in-fact should consult a lawyer if he or she has any questions prior to signing an affidavit.

Power of attorney requirements

1. Two witnesses are required regardless if a notary is involved
2. The principal must be competent at the time of signing.

When does a power of attorney end?

1. When the principal revokes the document in writing to the listed attorney-in-fact.
2. If the power of attorney is NOT DURABLE, the authority ends when the principal becomes incapacitated.
3. A court can overrule a power of attorney.
4. When the principal passes away, the document is of no use. It is only valid while the principal is living.