It is very important to get a financial power of attorney (FPOA). This is a document that allows you to give legal authority to an agent to help you manage your financial affairs. There are different FPOA for different purposes. In this article we will be focused on FPOA used for incapacity planning, estate planning and for your unavailability. To handle your affairs in these cases, the FPOA is an insurance policy to protect you if you can’t make financial decisions for yourself. Without a FPOA, your loved ones won’t be able to handle your financial affairs for you without going through a costly and time consuming guardianship proceeding. While a FPOA is an essential document, it is not without its flaws. In this article we will look at some of the common issues to keep in mind when obtaining and using a FPOA.
The biggest issue that a person obtaining a FPOA needs to be aware of is that of acceptance. The main issue is that there is no guarantee that a third party will recognize and accept the FPOA.
There certain agencies and organizations who have their own specific forms or specific language that they require before they will accept a FPOA.
While a FPOA from another state maybe valid, some businesses will not accept them.
An older FPOA can create administrative difficulties for the third party receiving the POA. These third parties may be concerned that the law had changed since the principal obtained the POA, or that it will be more difficult to verify the validity of the FPOA. Often, in these cases, the third party will require additional documentation to verify the FPOA.
In certain court cases, the principal has specific knowledge that the case is based on, for example, a divorce or family court case. In these types of cases it is very unlikely for the court to accept a power of attorney, because the agent may not have this specific knowledge
To minimize all of these issues, it is important to work with your attorney to draft an FPOA that is well drafted and specific to your needs. It is also valuable to regularly update your estate planning documents so that they are current with respect to your circumstances and the law.
Sometimes the way a person drafts their FPOA may lead to other major issues.
Many people go online and find FPOA forms that they fill out themselves. Sometimes these are older documents which are no longer valid. While a POA does not normally expire, the POA must be valid when it is signed.
Some people use bank provided FPOA forms. These documents will specifically list account numbers, and therefore will not be useful for anything other than transactions involving those specific accounts.
Another drafting issue that often can cause problems is that there is just a blanket statement of authority granting the agent power to handle the principal’s affairs. Third party recipients will often question such broad statements in a FPOA.
Another drafting issue occurs with springing financial powers of attorney. These types of FPOA go into effect when an event specified in the document occurs. Most commonly this specific event is the incapacitation of the principal. The issue that occurs is that incapacity can often be vague. If the document does not specify exactly what constitutes incapacity then there can be delays in when the FPOA becomes effective.
Often these issues can be remedied by getting a well drafted and specific FPOA.
Another issue, which is more specific to estate planning, involves gift transfers. In order to have your agent do gift transfers, you need to include a specific gift rider in your FPOA. This can be important if you are using the FPOA for estate planning purposes. Often an estate plan involves a schedule of gift giving. A principal will often use gift giving for estate tax and Medicaid purposes.
In conclusion, a FPOA is a valuable document. It protects you against incapacity and allows you to choose someone to help you manage your financial affairs. Even if you get a FPOA, certain problems can arise that can make them less effective. Often you can eliminate many of these issues if you get the document drafted by a professional who focuses on these types of documents, and if you get them reviewed from time to time.