Need help managing your financial affairs? A Power of Attorney is a powerful tool that you should consider.
The Power of Attorney is a written document where you give an agent (usually a trusted family member or friend) the authority to engage in financial transactions for you. It does not take away your power to handle your finances. It can be revoked in writing at any time.
Your agent owes you the highest duty of honesty and fair dealing. This is called a fiduciary duty. Your agent can’t engage in self-dealing (such as buying your house at a discounted price). Your agent owes an accounting to you of all transactions he or she has done. Your agent should know, before accepting the duty, that breaching the fiduciary duty could result in criminal or civil action.
There are two types of POAs – general and limited. The description is self-explanatory. A general POA gives the agent broad discretion over a variety of transactions. The limited POW gives the agent very limited powers over a specific type of transaction, such as signing closing documents on a real estate transaction if you will be unavailable on the closing date.
A POA can be drafted to either cease or continue if you become incapacitated and are unable to handle your own affairs. The benefit to having it continue is that it may make a guardianship of the estate unnecessary, because your financial affairs are being handled during your incapacity. This is known as a “durable” POA. The benefit to having it cease on your incapacity is that it keeps your agent from acting without any type of supervision or regular accountability.
A POA can also be drafted so it is “springing,” meaning that it does not go into effect until you become incapacitated.
If you decide that you want a POA, that brings the next question into play – who do you name as agent? You should look at a responsible person who will put your interests above all else, someone with a track-record of trustworthy behavior who does not need your money and who is sophisticated enough to engage in financial transactions.
Bad attributes for an agent:
- Convicted of a felony or a crime of moral turpitude (such as theft)
- Substance abuse
- Not a good money manager
- In need of money
- Previously filed bankruptcy
- Subject to being influenced by others
- Owes you money or is being supported by you
- Unstable marriage or going through a divorce
- A recent acquaintance
- A third-party caregiver
At Hammerle Finley, we have counseled principals and agents on Powers of Attorney. Give us a call.
