What is a Financial Power Of Attorney
A financial power of attorney grants a trusted agent (also called an attorney-in-fact) the authority to act on behalf of the principal (the person granting authority) in financial matters.
BREAKING DOWN Financial Power Of Attorney
The financial power of attorney (also referred to as a general power of attorney or a power of attorney of property) gives the agent the power to manage the financial life of the principal when he or she is unable to do so. (See Power Of Attorney: Do You Need One?)
The agent can legally manage the principal's finances and property, make all financial decisions and conduct all financial transactions (unless the power of attorney specifically limits his or her authority). The agent is legally obligated to make decisions consistent with the wishes of the principal, but has full authority to make autonomous decisions until that authority is challenged and revoked in a court of law.
In some states, financial powers of attorney are automatically considered "durable," meaning they remain in effect after the principal becomes incapacitated. In others, if the principal wants them to be durable, he or she needs to include that information in the power of attorney, in addition to other specifics about the powers the principal is granting.
Filling Out a Financial Power of Attorney
Most states have simple forms to fill out to make someone your financial agent. Most states don't require that the principal use these forms, but it is considered prudent to do so. Generally, the document must be signed, witnessed and notarized. To notarize is to certify a legal document via a notary public. Notaries act as government agents to witness the authenticity of signatures appended to legal attestations.
If the agent will have to negotiate real estate assets on behalf of the principal, some states require that the document must be placed on file in the local land records office. Finally, many banks have their own forms, and while not strictly necessary, it will make the process much easier if the bank is notified about the identity of the financial agent.
The financial power of attorney is automatically extinguished upon the principal's death. That means that the agent can only make financial decisions for the principals while he or she is alive and incapacitated. To deal with financial matters after the principal's death, an executor will have to be named in the principal's will.