A Financial Power of Attorney is a very powerful and useful tool. However, there are several misconceptions about financial powers of attorney and what they can and can not accomplish. Here are a few that I wish everyone better understood.
- Can I use a Financial Power of Attorney to help my elderly family members now even though they are still very much competent?
Yes, a financial power of attorney can be used to assist those loved ones who are cognitively competent; however, their eyesight might not allow them to read financial statements; or perhaps a loss of hearing makes it impractical to speak on the phone; or maybe they are just no longer ambulatory making trips to the bank very difficult. According to this local domestic and Kansas Car Accident lawyer, you as the agent, can use a financial power of attorney to act on their behalf in making financial transactions; however, this does NOT take away their authority to act on their own behalf whenever they choose.
2. Do we need a Financial Power of Attorney even if all of our property is held Jointly?
At first blush, it may seem that you do not need a financial power of attorney if all of your assets are held jointly with a spouse. However, most professionals would agree that a financial power of attorney is still a good idea. One spouse may become incapacitated shortly after the other or perhaps both could become incapacitated at the same time. Furthermore, an asset may later be discovered that is not in the joint names, etc.
3. Since we have a Revocable Living Trust, we do not need a Financial Power of Attorney–isn’t that correct?
The trustee of a Revocable Living Trust has many of the same powers that an agent of a financial power of attorney. However, most professionals would agree that it is still prudent to have a financial power of attorney. Often the Trustee of the trust is the same person named as the agent in the Financial Power of Attorney. Usually, not all assets and income end-up passing through the trust. Therefore, the financial power of attorney can be used to manage those assets or perhaps even transfer those assets into the revocable trust to be managed by the Trustee.
4. Are there different types of Powers of Attorney?
Yes, there are actually many types. However, the two main types are financial and medical. A medical power of attorney –also known as a Health Care Power of Attorney–gives a family member or trusted friend the authority to make health care decisions on your behalf in the event you are incapacitated. A financial Power of attorney gives the agent the power to make financial decisions on behalf of the principal.
5. What are some things a Power of Attorney Can NOT do?
Although a financial power of attorney can grant broad authority to the agent, there nevertheless remain some limitations on the agent’s power.
Generally speaking, an agent can NOT change the principal’s Last Will and Testament.
Act in a way that undermines the agent’s fiduciary duty to act in the principal’s best interests.
An agent can not change or transfer the POA to someone else. As a general rule, the document must set forth who is to take over control of the principal’s financial affairs if the agent declines or resigns his appointment.
6. What is the Uniform Power of Attorney Act (UPOAA) and what does it mandate?
The UPOAA mandates that in order for an agent to engage in certain activities, the power to engage in that activity must be expressly granted/stated in the POA Document:
- Any Compensation for the agent;
- Any gift giving including gifting to assist the principal to qualify for financial assistance, etc.
- Ability to alter or change beneficiaries.
Moreover, banks and and other third-parties do not have to accept a Power of Attorney. Therefore, it is often prudent for the principal to provide copies of the POA to banks, doctors, and financial institutions while the principal is still competent. This will allow the principal to make changes and provide any needed follow-up with the bank and other financial institutions.
7. What happens to the POA when the principal dies?
As soon as the principal who granted the agent the power of attorney passes, the agent’s ability to act on behalf of the principal is immediately terminated.
Financial Powers of Attorney are very complicated documents and should be drafted by a competent estate planning or elder law attorney who has taken the time to know both the law and your family’s unique situation and goals. Please contact the office, and we will be more than happy to refer you to a professional and competent attorney who can assist you in this area.