Financial POA Guide
(By Experienced Law Attorney Becky Cholewka)
A Financial Power of Attorney is a document created to appoint an individual or organization to handle your financial and other affairs if you become incapacitated or are otherwise incapable of making financial decisions on your own. With a properly designed and implemented Financial Power of Attorney you, not the court, chooses the person authorized to make important financial decisions on your behalf. This is extremely important because without such a legal document, the court could very well appoint someone you do not trust or simply don’t want to make these decisions.
A Financial Power of Attorney can provide broad and extensive powers to make decisions on your behalf, including:
- Filing of tax returns
- Buying and selling real estate property
- Managing property
- Handling bank transactions
- Entering safety deposit boxes
- Acquisition of life, health, and automobile insurance
- Settling claims
- Entering into contracts
- Managing stocks
- Operating Businesses
- Transferring assets to a Revocable Living Trust
Determining the best person to serve as your Financial Power of Attorney is obviously an important decision.
Power of Attorney Types
In the state of Arizona, there is a “springing” power of attorney and a “durable” power of attorney.
- Springing: This power of attorney form only takes effect if you are determined to be mentally incapacitated. At this stage, you are no longer able to manage your finances or make healthcare decisions for yourself. A springing power of attorney has no legal authority over your assets until you have been declared mentally incapacitated. One disadvantage of naming a springing power of attorney is that payment of bills and investment of assets have to be delayed until all requisite documents confirming your mental incapacity have been signed.
- Durable: This takes effect from the moment you sign it. A durable power of attorney provides your designated person the authority to manage, spend, and invest your assets on your behalf. This speeds up the process of paying bills and asset management, but you need to have complete trust in the individual chosen as your durable power of attorney.
It is always best if you hire an experienced attorney to prepare documents for naming a power of attorney. You should go through the process with your attorney to ensure you understand what it entails.
Durable Power of Attorney
A Power of Attorney legally authorizes someone to act on your behalf, either financially or medically. This person is your agent and through this legal document has the authority to perform any action you would, such as signing checks, selling real estate, running a business, or making medical decisions. Your attorney works with you to make the document as broad or as narrow as you choose, ensuring your agent acts only within the scope of the document. In a regular power of attorney, this relationship ends when the purpose is fulfilled, or upon your incapacitation or death. A Durable Power of Attorney serves the same function, but it remains in effect even if you become incapacitated due to illness or injury, making it an important estate-planning tool.
Preferably, you will have two Durable POAs: one that covers your medical wishes and another to address your financial assets. In the event you become incapacitated, your agent continues acting on your behalf. This protects you and your family from the court deciding who makes these decisions for you, ensuring your family’s needs continue to be met. The Durable Power of Attorney ends upon your death.
Durable Medical Power of Attorney
A Durable Medical Power of Attorney is an advance care directive that details your wishes for health care in the event you become injured or too ill to speak for yourself. Also called a Durable Power of Attorney for Health Care, this legal document names the person you trust to act as your agent to make health care decisions in your stead.
Your agent works with your physicians and other healthcare providers to ensure your medical wishes are granted. To ensure your wishes are followed, openly discuss them with your agent as well as your family and primary care physician. The document can be as specific as you choose.
Including this document in your planning saves your family from enduring a stressful, expensive Guardianship proceeding, in which the court determines who makes these medical decisions if you become incapacitated.
Durable Financial Power of Attorney
A Durable Financial Power of Attorney gives your agent the authority to handle financial transactions on your behalf, even if you become incapacitated. Though some powers of attorney are limited in scope, such as appointing someone to handle a single real estate transaction, a Durable Financial Power of Attorney is a comprehensive legal document naming a person you trust to act as your agent to manage any task you yourself would handle were you not incapacitated.
Tasks you may include in a Durable Financial Power of Attorney include depositing and writing checks, opening mail, completing tax returns, and managing investment and retirement accounts. Your agent may choose to hire professionals to assist in making some of these decisions, using your assets to pay for their assistance.
Why You Need Both
Technically, a single Durable POA can cover both medical and financial matters. However, separate documents are not only recommended by legal professionals, but also preferred by clients. This is due to confidentiality preferences. Your Durable Health Care Power of Attorney likely has details you prefer to not share with your financial agent, just as your Durable Financial Power of Attorney likely has details your health care providers do not need to see. People may choose the same or different agents for each document.
When to Prepare a Durable Power of Attorney
Preparation of your Durable Financial and Medical POAs should take place at the beginning of your estate planning, while your health is still good. If you become incapacitated or deemed incompetent without drafting a Durable Power of Attorney, your family may not make financial or medical decisions without court approval. Your Durable Power of Attorney may be written so that it goes into effect immediately, or you may choose to delay its application until you become incapacitated. Although it remains in effect until your death, you may revise or revoke the document at any time so long as you have mental capacity to do so.
When it comes to estate planning, financial and medical powers of attorney ensure your wishes are honored. However, questions abound. What is the difference between durable and general powers of attorney? What can you include? How do you choose an agent?
Tips on Choosing Your Powers of Attorney
Becky Cholewka: One of the things we ask people to think about, before they come in and meet with us, is give some thought to who you want to choose to act for you in certain situations.
For example, who do you want to make medical decisions for you if you’re not able to make them for yourself? That would be your mental health care and healthcare power of attorney. We oftentimes get clients in here who just want to choose their oldest child, just for the mere fact that they’re the oldest child.
I always encourage people to think about what that person needs to do. They need to be good in a crisis situation. They need to be able to talk to doctors and nurses and understand medical information. They need to be able to talk to other family members, to be able to keep other family in the loop.
They also need to be able to make sure that they can stand up for you to a doctor, and encourage a doctor to follow your wishes- for example, from a living will.
It’s not just about who’s the oldest, but really who has the best skill set to be able to make those decisions for you in a crisis situation. It is super important to ask yourself these questions and think about the answers before you choose anyone legally.
Financial Powers of Attorney Problems
Interviewer: What problems are you seeing with financial powers of attorney?
Interviewee: Financial powers of attorney right now are giving estate planning attorneys a lot of grief across the country. We talk about this a lot with other attorneys. Banks, right now, at least here in Arizona don’t like them.
What they’re telling their clients is, “You know what? Why don’t you go to court and have the court tell us what to do.” That’s just because we don’t have strong laws here in Arizona that says, “Bank, if you don’t use this Power of Attorney when someone takes you to court, you have to pay all their attorney’s fees and costs.”
We don’t have that in place. Banks are taking the cautious road and are just saying, “Go to court first and then bring that court order back to us.” Those very simplistic Powers of Attorney that you see that are even from the state website, they generally don’t work.
They need to be comprehensive financial powers in order for financial institutions to really accept them.
Financial power of attorney FAQ’s
This Arizona Power of Attorney FAQ answers the more common questions (hence the title, FAQ). However, if you want further information, feel free to contact the team at Cholewka Law, or leave a comment below for us to answer.