Financial Power of Attorney:How it Works ?

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Financial Power of Attorney:How it Works ?

A durable financial power of attorney can avoid financial disaster in the event you become incapacited.

You can also use a POA to allow someone to transact business for you if you are out of city  or else unapproachable 

A financial power of attorney (POA) may be your solution if  you need to give another person the ability to conduct your financial matters when you are unable to be present.

What is the Power of Attorney ?

A power of attorney or POA is a legal document that authorises someone to act on your behalf.

The “principal”is the person who gives the authority and the “agent” or the “attorney-in-fact” is 

the person who has the authority to act for the principal.

What is a Financial Power of Attorney ?

A financial power of attorney is a particular type of POA that authorises someone to act on your behalf in financial matters. 

Many states have an official financial power of attorney form which is used by the peoples of that state.

How Does a Power of Attorney for Financial Work ?

Once the power of attorney is executed, the original is given to your agent, who may also present it to a third party as proof of your agent’s authority to act for you. 

The perform withdraw of money from your bank account, or at a real estate closing he can sign papers for you.

You are lawyall obligated to a third party who relies on the power of attorney in dealing with your agent.

When Does a Power of Attorney Become Effective ?

Depending upon how  it is formulated,a POA can either become effective immediately after it is signed,or after the occurrence  of a future event.

If the POA is effective immediately, your agent may act on your behalf even if you are available or incapacited.

This is done when someone can not be present for a particular transaction,or so that one spouse is able to represent an out of town spouse

However, normally people don’t want to give someone authority as long as they can act for themselves comfortably.

If a POA becomes effective after  the occurrence of a future event, then it is called a springing power of attorney, as it “springs” into effect if the event occurs.

The incapacity of the principal is the most common future event. When the principal is certified by the physicians to be either physically or mentally unable to make decisions, then it is called the Incapacity of the principal.

Incapacity could be due to mental illness,Alzheimer’s disease,being in a coma, or unable to communicate.

When Does a Power of Attorney End ?

After the death of the principal, the authority conferred by a POA ends.

The authority also ends if the principal becomes incapacitated,unless the power of attorney states that the authority continues.

If the authority continues After incapacity,it is called a durable power of attorney (or DPOA).

In cases of incapacity,a DPOA will avoid someone having to go to court to be appointed the guardian of your property.

If you revoke the authority,the authority also ends ,a court invalidates it . 

Your agent is no longer able to serve and you have not appointed an alternative or successor agent or in some states,if your agent is your spouse and you get divorced.

Who should be your Agent ?

The person should be at least eighteen years of age and of sound mind to be elected as an agent.

It is prerequisite that your agent should be someone to whom you trust. 

Your agent has the legal responsibility to act in your best interest, to keep records of transactions not to mix your property with theirs and not to engage in any dispute of interest. 

It is important to trust the person you select, though an agent yet  has the potential to act illegally ,

How to make a Financial Power of Attorney ?

Most of the states have an official durable power of attorney form.

It is commonly a durable financial power of attorney form. Some banks and brokerage firms have their own power of attorney forms.

Also for buying or selling real property, a title  insurance company,lender or closing agent may require the use of their form. So, you may end up with more than one financial POA form.

Usually  a Financial Power of Attorney must be signed in the presence of a notary public. If the sale or purchase of a real estate is involved, it may also need to be signed before witnesses.

The agent is also required to sign to accept the position of agent in some states.

What Can an Agent Do ?

Depending on what you say in the POA,your agent may do as much,or as little as you wish. 

Some people grant an agent the authority to conduct all financial matters, while others only authorise a single financial transaction (such as signing documents at a real estate closing). 

In some states the official POA forms includes various types of financial matters, such as:

  • Real property transactions 
  • Personal property transactions 
  • Stoke , bond or other securities transactions 
  • Banking and other financial institutions transactions 
  • Handling the operation of a business insurance and annuity transactions 
  • Estate,trust and other beneficiaries transactions 
  • Claims and litigation 
  • Government benefits
  • Retirement benefits
  • Tax matters 
  • Safe deposit box access
  • Making gifts to individuals or charities

Acceptance of a Power Of Attorney by Third parties.

A third party is not required to accept a Power of Attorney. 

Some state laws provide penalties for a third party who refuse to accept a power of attorney using the state’s official form.

One thing you can do to help assure its acceptance is contact anyone you think your agent may need to deal with and be sure they find your POA acceptable. 

What to do if you already have Joint Property ?

If you and your spouse or another person own property jointly, the property will automatically transfer to the survivor after your death. 

But this will not allow the other person to sell or lease the property if you become incapacitated, but a Durable Power Of Attorney will.

While a living trust will typically allow the trustee to transact business for the trust if you become incapacitated, most people don’t put all of their property into their trust.

You should consider a Durable Power Of Attorney(DPOA) for the property,  if you own any property that is not in the trust,

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