A financial power of attorney is a document that provides a trusted individual with the authority to act on your behalf. The person who creates a power of attorney is called the “principal, and the person who receives this authority is called their “agent” or “attorney-in-fact.”
The Brainerd Dispatch recently interviewed Minnesota Attorney General Lori Swanson in its article, “Guest Opinion: Your legal rights – Financial powers of attorney.” The Attorney General explains that this person doesn’t have to be an attorney, but it should be someone the person trusts. This person should be responsible, honest and diligent.
A power of attorney is required to be in writing, signed before a notary, dated and clear on what powers are being granted by the principal (i.e., the person having the document prepared). If you want to make the power of attorney durable, meaning you want it to last even if you become incapacitated, then the document must have a statement like: “This power of attorney shall not be affected by incapacity or incompetence of the principal.”
You should talk to a lawyer when creating a power of attorney to be certain the power of attorney is drafted in a way that aligns with your wishes and with state law.
When creating a power of attorney, you must decide on the degree of authority you want your agent to have over your affairs. A general power of attorney gives your agent the ability to act on your behalf in all affairs. However, a limited power of attorney grants your agent this authority only in certain circumstances.
A power of attorney is a wise move for every adult American, because each of us may become unable to manage our own financial affairs or make other decisions. Here are some examples of powers you can give to your agent:
- To use your money to pay your everyday living expenses;
- To manage benefits from Social Security, Medicare, and other government programs;
- To conduct transactions with your bank and retirement accounts; and
- To file and pay your income taxes.
A principal can revoke a power of attorney. A mentally competent person can remove a power of attorney at any point with a signed document. If a power of attorney isn’t removed, it ends with the principal’s death.
Note that some banks and investment firms have their own power of attorney forms. Preparing these organization-specific forms may make it easier for your agent to work with certain organizations with which you do business.
Reference: Brainerd Dispatch (November 20, 2018) “Guest Opinion: Your legal rights – Financial powers of attorney”