What is a financial power of attorney?
A Financial Power of Attorney is a document in which you nominate someone to make financial decisions for you. When you appoint someone to make those financial decisions, you are called the Principal. The person you nominate to act on your behalf is called an Agent. A Financial Power of Attorney can be used for a one-time transaction, such as selling or buying a house, or it can be a durable financial power of attorney written to allow broad powers that can be used for many types of financial transactions for many years. The term “Durable” in this case means the Financial Power of Attorney remains in effect even if you, the Principal, become mentally incapacitated. If you are helping someone else with their finances, you will need this document before you can even talk to insurance companies, real estate agents, attorneys and financial institutions.
What does it do?
It allows the Agent to make financial decisions for you. The financial decisions you allow the agent to make can be as broad or restrictive as you choose, though you will want to think about what decisions someone might have to make when you are no longer able to guide them. Usually, the POA allows an agent to open and close bank accounts, sign checks, sign contracts, buy and sell real estate, deal with your insurance companies and your employer. You will also need to decide if the agent can make gifts on your behalf.
Why do I need one?
Financial institutions will not talk with anyone on your behalf unless you have nominated them to be your agent in a Power of Attorney document.
What happens if I don’t have one?
If you don’t have a poa, or if it does not authorize your agent to conduct financial transactions necessary for your support and you do not have the capacity to conduct your own affairs, your family may have to petition a court to have a conservator appointed to manage your affairs for you. The court process to have a conservator appointed can be very expensive and can take months.
Where can I get one?
There is a statutory form available online, but most of the time it is best to have an attorney prepare a power of attorney designed to fit your needs.