A power of attorney is a document that gives a person the authority to act on behalf of another. The person creating the document is known as the “principal,” while the person being authorized is called the “agent” or the “attorney-in-fact” This doesn’t have to be an attorney; it can be anyone the principal chooses.
There are many different types of powers of attorney, depending on what tasks the attorney-in-fact is authorized to perform. For example, there are durable power of attorney, health care power of attorney, and several others. A “Financial Power of Attorney” grants the agent the authority to handle the principals’ financial matters.
The scope of the financial agent’s duties may vary according to individual need, but they should be specified in the power of attorney document. There are also various standards of care that the agent, or “attorney-in-fact,” needs to follow.
What Can Be Authorized through a Financial Power of Attorney?
It is up to you to specify exactly what your financial agent can and cannot do. Generally, financial powers of attorney grant the agent the authority to:
- Pay your bills and taxes
- Pay medical expenses
- Manage real estate properties
- Access your finances and bank accounts
- Make investments on your behalf
- Collect retirement benefits for you
- Transfer and/or sell your assets
- Purchase insurance for you
- Operate your small business
- Hire persons to represent you in other matters
Thus, the scope of duties listed in a financial power of attorney can potentially be very broad. On the other hand, a financial power of attorney might focus only on one specific task, and will terminate the agent’s authority upon completion of that specific task.
How Long Does a Financial Power of Attorney Last?
The agent’s authority usually begins once the financial power of attorney is signed. In some cases, the agent’s authority only begins once as specified condition is met; for example, if the principal becomes incapacitated. This is known as a “springing” power of attorney.
The financial power of attorney may be terminated in many ways. One way this power may end is upon the completion of the specified tasks. If the agent’s authority is to end after their specific task is completed, this is known as a “limited power of attorney.”
A “durable power of attorney” lasts indefinitely. Essentially, this means the agent has power until the principal dies or otherwise indicates their desire to end the arrangement.
Just like the powers it will grant, when your financial power of attorney will start and end is up to you. It is necessary to choose the type of financial power of attorney that will work best for your needs.
What If I Have a Dispute with My Financial Agent?
Keep in mind that you authorized your agent to exercise their own judgment and discretion when performing tasks on your behalf. However, the overall guiding principle that they should follow is that they should act in the best of your interests. As mentioned, they also need to follow various rules and exercise a good faith judgment when acting on your behalf.
On the other hand, if it’s clear that the agent did not act in your best interest, you may be able to file a lawsuit against them and recover your losses. This may include lost profits that they may have caused. Some disputes may arise if the agent:
- Acts outside the scope of their authority
- Fails to exercise good business judgment when investing funds
- Acts illegally or conducts illegal transactions
- Mixes your funds with their own funds (“intermingling assets”)
In some cases, you may also be able to recover punitive damages if the agent also acted with malicious intent or with recklessness regarding your assets.
Do I Need a Lawyer for Assistance with a Financial Power of Attorney?
A qualified estate lawyer can be of great assistance to you regarding financial powers of attorney. Your attorney near you can help you identify what your needs are and put together the necessary documents. Additionally, if a lawsuit arises between you and your agent, your lawyer can help protect your interests during court proceedings.