What Can You Use Your Financial Power of Attorney For?
So far in this series on financial powers of attorney (FPoA), we discussed the basics of what a power of attorney (PoA) is, and then detailed a FPoA’s flexibility by going through many of the customizations that you can make. In brief, a power of attorney is a document that allows its signer, known as the principal, to give legal authority to another person, known as an agent (or attorney-in-fact), to step into the principal’s shoes and act for them. This article will continue the series by looking at the many uses of a FPoA. Specifically, we are going to look at the numerous powers that you can give to your agent. Every person should have at least two PoA (one for health and another one for finances) to protect themselves in case of incapacity. Apart from incapacity planning, there are several other reasons people sign a power of attorney. We will go into some of the specific reasons in this article.
Incapacity planning is one of the most important reasons to get a PoA. Having theis document in place allows your loved ones to move quickly to do for you those things that you would not be able to do for yourself. We have in a previous article gone through the importance of a health PoA (or health care proxy), which lets your agent make medical decisions on your behalf. If you have a durable financial power of attorney, it will last through your incapacity and allow your agent to make financial transactions for you while you are incapacitated. This includes paying your mortgage, making your car payments, paying credit card bills and other financial matters. This is a very important function of the agent, particularly if your incapacity is short in duration. Without a FPoA in place, you could come out of your incapacity, and find that you have incurred late fees, foreclosures and repossessions. Without a FPoA, in order to take care of your financial matters, a loved one would have to go to court and go through a guardianship proceeding. Guardianship proceedings are costly and time consuming, which could mean that your loved ones cannot take care of your bills in time to avoid negative consequences. Other powers that could be necessary for an agent in these circumstances include the ability to:
manage your property- including real estate
the ability to do your estate planning
the ability handle certain court proceedings for you
the ability to file your taxes
the ability to make sure you get the government benefits you are entitled to.
Specific Transaction Assistance
This is a broader category and it includes different categories of people. In general, the people who fall into this category are people who need a limited or special PoA. This type of PoA is only for a specific action, and it expires once the action is completed. There are a large number of transactions where these types of PoA are used. Some of the more common ones are: transfer of title for a home or vehicle, making specific financial decisions, collecting debts, selling personal property, securities transactions, and entering a safety deposit box, among many others. This type of PoA is often useful to save time and avoid mistakes by allowing a specialist to make a transaction for us.
General Assistance with Financial Affairs
If you are a person who is not incapacitated and you require assistance handling financial matters, you can get a general PoA. Generally, people who are getting older, have special needs, who are ill, or who cannot currently handle their finances for whatever reason will execute a PoA so that they can appoint an agent to assist them. If you wish, you can make a general PoA durable so that it will continue in case you become incapacitated. That is not required however; you can have a separate document that is only for your affairs before you become incapacitated. Many times these PoA will be limited to a specific type of transaction. For example, a person might sign a PoA that gives their agent the authority to handle all of their banking transactions. It is important to remember that when you create a PoA, you authorize your agent to act for you in certain ways, but you do not give up your ability to perform these acts for yourself. You can give your agent the ability to represent you in a very broad range of areas. You can give them the power to help you deal with the government, the courts during certain proceedings, banks, creditors and other financial matters. An agent may also help in this situation by hiring other people to assist the principal, such as nurses, housekeepers, etc. The agent can also coordinate the acquisition of an estate plan. If the principle signs a special gift rider, the agent can carry out parts of the estate plan, such as give gifts, donate to charity and transfer assets into trusts.
Another reason why people get a FPoA is if they are going out of the country, and will be out of contact. This is not normally a concern if you are going away for a short time, but if you will be away for a significant amount of time, it is valuable to appoint someone to handle your financial affairs while you are away.
A financial power of attorney is a very valuable document. It allows a principal to appoint someone to help them handle their day to day affairs. It protects them if they become incapacitated. It saves time and money in a number of situations. It is often a difficult decision to make; many fear that they are giving away their ability to make decisions for themselves. This is not the case. Illness and accidents can happen at any time, and when they do, they present a large number of issues. Planning ahead will help you make dealing with them a little easier.