Making a Financial Power of Attorney To create a legally valid durable power of attorney, all you need to do is properly complete and sign a fill-in-the-blanks form that's a few pages long. When a Financial Power of Attorney Ends Your durable power of attorney automatically ends at your death.
Your durable power of attorney also ends if: You revoke it. As long as you are mentally competent, you can revoke a durable power of attorney at any time. You get a divorce. In a handful of states, if your spouse is your agent and you divorce, your ex-spouse's authority is automatically terminated. In other states, if you want to end your ex-spouse's authority, you have to revoke your existing power of attorney. In any case, it's wise to make a new document as soon as you file for divorce.
A court invalidates your document. It's rare, but a court may declare your document invalid if it concludes that you were not mentally competent when you signed it, or that you were the victim of fraud or undue influence. No agent is available. To avoid this problem, you can name an alternate agent in your document. Talk to a Lawyer Need a lawyer? Start here.
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The purpose of a durable POA is to plan for medical emergencies, cognitive decline later in life, or other situations where you're no longer capable of making decisions. A general durable power of attorney both authorizes someone to act in a wide range of legal and business matters and remains in effect even if you are incapacitated. The document is also known as a durable power of attorney for finances.
The POA can take effect immediately or can become effective only if you are incapacitated. The person you appoint is known as your agent, or attorney-in-fact, although the individual or company doesn't have to be a lawyer. An attorney-in-fact can handle many types of transactions, including:. If you become incapacitated and don't have a general durable power of attorney, your family may have to go to court and have you declared incompetent before they can take care of your finances for you.
So it's a good idea to have one in place—just in case. A durable healthcare power of attorney is useful when a medical emergency leaves you unconscious or otherwise unable to make choices about your care. It appoints someone else to communicate with doctors and make medical decisions for you. Such a document differs from an advance directive, or living will, which details the treatment you want if you are at the end of your life and can no longer communicate.
A healthcare power of attorney, on the other hand, names someone to make medical decisions any time you are unable to do it yourself, even if you are expected to make a full recovery. You can find DIY durable power of attorney forms online.
However, it's helpful to talk to an attorney about your estate planning needs so they can recommend the documents that will work best for your particular situation. If you hold power of attorney for someone else, bring a certified copy of the document with you when you conduct business or communicate with healthcare providers.
If you're signing documents as power of attorney , use your name and then indicate that you're signing as power of attorney. Ask about the preferred format before you sign. You can revoke your power of attorney at any time, as long as you're mentally competent.
You should do this in writing. It's also a good idea to notify financial institutions and other businesses that your attorney-in-fact has dealt with. The question of who can override a power of attorney for a loved one is more difficult. If you believe someone is abusing their position as power of attorney, you may be able to take legal action to have them removed. An attorney with experience in both estate planning and elder law can help.
Contents 3 min read. Just make sure you indicate that you are signing for your Principal, not for yourself. For a number of reasons, third parties are sometimes hesitant to honor Powers of Attorney. Still, so long as the Power of Attorney was lawfully executed and so long as it has not been revoked, third parties must honor the Power of Attorney. Under some circumstances, if the third party's refusal to honor the Power of Attorney causes damage, the third party may be liable for those damages and even attorney's fees and court costs.
Even mere delay may cause damage and this too may subject the third party to a lawsuit for damages. It is reasonable, however, for a third party to have the time to consult with legal counsel about the Power of Attorney. There comes a time, of course, when delay becomes unreasonable.
Upon refusal or an unreasonable delay, call your lawyer. To third parties, the Power of Attorney you have shown them is nothing more than a piece of paper with writing on it. They do not know if it is valid or forged. They do not know if it has been revoked.
They do not know if the Principal was competent at the time the Power of Attorney was signed. They do not know whether the Principal has died. Third parties do not want the liability if anything goes wrong. Some third parties refuse to honor Powers of Attorney because they believe they are protecting the Principal from possible unscrupulous conduct. Refusal is more common with older "stale" Powers of Attorney, although in fact age should not matter.
If your Power of Attorney is refused, talk to your lawyer. An affidavit is a sworn written statement. A third party may require you, as the Attorney-in-Fact, to sign an affidavit stating that you are validly exercising your duties under the Power of Attorney. If you want to use the Power of Attorney, you do need to sign the affidavit if so requested by the third party.
The purpose of the affidavit is to relieve the third party of liability for accepting an invalid Power of Attorney. In Tennessee, an affidavit that is similar to the one at the end of this Web page is acceptable to most third parties. Other states may have a different form. You may wish to consult your attorney. The law provides that that third party may be liable for any losses caused by the refusal as well as attorney's fees and court costs. The problem, however, can usually be resolved with a call from your attorney to the third party.
In most cases, once the law is explained to the third party, the Power of Attorney is accepted. As an Attorney-in-Fact, you are fiduciary to your Principal. A "fiduciary" is a person who has the responsibility for managing the affairs of another, even if only a part of that person's affairs are being managed.
You, as an Attorney-in-Fact, are liable to third parties only if you act imprudently or do not use reasonable care in performing your duties. If ever you are acting as an Attorney-in-Fact and are unsure as to whether you are doing the right thing, seek out professional advice not only to protect yourself but to protect the Principal.
So long as you act prudently, use care, and are cautious about managing the Principal's affairs, you will probably not be liable for individual bad investments. The law looks at your management of the entire investment portfolio and determines whether, as a whole, your conduct was proper. The law says that no one specific investment is enough to show you acted imprudently.
Still, anyone can sue for any reason. Whether a person will be successful is another question altogether. If a person believes that you made bad investment decisions and that those decisions affected him or her, the person may sue you but the court will look at your management of the entire investment portfolio, not just the bad investment or investments. You may be liable for any losses only if the court finds that, as a whole, you were not prudent in your investments.
If you have responsibility for managing the financial affairs of the Principal, the general rule is that you must diversify the Principal's investments. This means that you should spread out the Principal's money so that you spread out the risk. In this way, if one or two investments go bad, there are other monies that survive. If you feel that it is in the Principal's interest not to diversify, you are free not to do so, but by not diversifying the investments you increase your exposure to liability.
If you are unskilled or unsure of your ability to invest your Principal's money under this fiduciary standard, you should seek the advice of an investment advisor or counselor. The law is a test of conduct and not resulting performance. In other words, so long as you were reasonably cautious and prudent with the investments, you are not liable.
Even the most experienced and conservative of investors lose money from time to time. Principal is the mass of assets or capital accumulated by the Principal. Income is money that comes in and adds to the Principal's principal or gets spent. You, as a fiduciary, have the responsibility to consider both the safety of the Principal's capital and the reasonable production of income.
This is a balancing act in which you need to decide how much income the Principal requires and how much capital must be sacrificed, if any, to generate that income. If an asset is producing no or little income, you need to consider trading off that asset for a more productive one. The law states that you have a duty to pursue an investment strategy that considers both the reasonable production of income and the safety of the capital.
When making investment decisions as an Attorney-in-Fact, you should first weigh the size and complexity of the Principal's estate against your own ability to manage finances. In certain instances, the most prudent investment decision is to seek professional advice on asset management.
Otherwise, you should consider such things as: 1 the general economic conditions, for example, whether a recession is looming; 2 the possible effect of inflation; 3 the expected tax consequences of investment decisions or strategies; 4 the role each investment or course of action plays within the overall portfolio; 5 the expected total return, including both income yield and appreciation of capital; and 6 the costs incurred in a transaction such as brokerage fees or commissions.
You may hire accountants, lawyers, brokers, or other professionals to help you with your duties, but you can never delegate another person to act for you as Attorney-in-Fact. The Power of Attorney was given to you by the Principal and you do not have the right to give that power to anyone else.
An Executor, sometimes referred to as a "personal representative," is the person who takes care of another's estate after that person dies. An Attorney-in-Fact can only take care of a person's affairs while they are alive. An executor is named in a person's will and can only be appointed after a court proceeding called "probate. A Power of Attorney empowers an Attorney-in-Fact to do certain specified things for the Principal during the Principal's lifetime.
A Living Trust also allows a person, called a "trustee," to do certain things for the maker of the trust during that person's lifetime but these powers also extend beyond death. A Living Trust is like a Power of Attorney in that it allows a person to manage another's assets.
Like an Attorney-in-Fact, the Trustee can do banking transactions, investments, and many other tasks related to the management of the person's assets. Unlike a Power of Attorney, however, the Trustee has control only over those assets that are titled in the name of the Living Trust. For example, if a bank account is titled in the name of the person alone, the Trustee has no power over that asset.
In order to give the Trustee control over an asset, the maker of the Trust must arrange for the account or property to be owned by the Trust.
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