At The Law Office of Raymond E. Brown, we understand that estate planning can be challenging, especially when it comes to the management of your finances in unforeseen circumstances. That’s why it’s important to learn what financial power of attorney is and how it applies to your financial matters.
Let’s start with the basics: financial power of attorney is a legal document that allows you to designate a reliable individual, such as a trusted family member or friend, to manage your financial affairs if you are unable to do so yourself. Whether you are planning for potential health issues, travel, or other personal reasons, having a financial power of attorney in place ensures that your financial matters are handled according to your wishes.
Don’t leave your financial future to chance; contact an experienced Annapolis power of attorney lawyer to ensure that your assets are protected and your peace of mind is secured.
Call The Law Office of Raymond E. Brown at (443) 554-9944 or contact us online to request a consultation today.
What Does POA Stand For?
POA stands for “Power of Attorney.” This is a legal document that authorizes an individual to make decisions on behalf of another person in financial, medical, or legal matters. The person granted this decision-making authority is known as the agent or attorney-in-fact, while the individual who assigns the power is referred to as the principal.
Is a Power of Attorney a Fiduciary?
Yes, a power of attorney document creates a fiduciary relationship between the principal and the agent. This means that the agent, or attorney-in-fact, is legally obligated to act in the best interests of the principal when making decisions or managing the principal’s affairs. The agent must act with loyalty, care, and honesty, ensuring that all actions taken under the POA benefit the principal and do not serve the agent’s personal interests.
What is a Financial Power of Attorney?
A financial power of attorney is a legal document that gives someone you trust the authority to manage your finances if you are unable to do so yourself.
This person, known as your financial agent, can make important financial decisions on your behalf, like managing your bank account and investment portfolio, paying bills, and handling financial transactions. The purpose of a financial POA agent is to ensure that your financial matters are taken care of according to your wishes, even if you’re unable to make those decisions yourself.
Types of Financial Power of Attorney
There are are a few different types of financial powers of attorney. These include General POA, Limited POA, Durable POA, and Springing POA.
General Financial Power of Attorney
A general financial power of attorney grants the agent broad power over the principal’s finances, including the ability to manage bank accounts, sell property, handle government benefits, and interact with insurance providers.
A general power of attorney is usually effective immediately upon signing and is commonly used in situations where the principal needs someone to manage their day-to-day financial matters, such as paying bills, overseeing business operations, or making investment decisions.
Under a general POA, the agent’s authority ends if the POA is revoked or in the event of the principal’s death. State law governs how this broad power is exercised, ensuring the agent acts in the principal’s best interest.
Limited (Special) Financial Power of Attorney
A limited financial power of attorney, also sometimes referred to as a special POA, restricts how much authority the agent has over the principal’s financial matters. For example, a principal may grant an agent the limited power to sell a particular piece of property, manage a single bank account, or handle specific business transactions while they are out of the country.
The scope of the agent’s authority in a limited POA is explicitly outlined in the document, ensuring that the agent can only act within the confines of the designated tasks. This type of financial POA is ideal for situations where the principal needs assistance with particular aspects of their finances but does not want to grant the agent broad authority over all their affairs.
Durable Financial Power of Attorney
A durable financial power of attorney remains in effect even if the principal becomes incapacitated, making it a crucial tool for long-term financial planning. The “durability” aspect of a durable POA means that the agent’s authority does not cease if the principal is declared incapacitated, unlike a non-durable POA, which would terminate under such circumstances.
A durable financial POA ensures that the agent can continue managing the principal’s finances and making important decisions during a time when the principal is unable to do so themselves. The durability of this power provides peace of mind, knowing that the principal’s finances will be taken care of regardless of their health condition.
Springing Financial Power of Attorney
A springing financial power of attorney only becomes effective upon the occurrence of a specified event, most commonly the principal’s incapacity.
Unlike a general or durable power of attorney, which can be effective immediately, a springing POA “springs” into action only when the triggering event, such as the principal being declared incapacitated, occurs.
This type of POA is often used in conjunction with a medical power of attorney to ensure that the principal’s health care and medical decisions are managed effectively if they cannot make decisions for themselves.
The springing power of this POA provides the principal with control over when the agent’s authority begins, ensuring they retain autonomy over their finances until the specified event activates the agent’s powers.
What Does a Financial Power of Attorney Do?
To recap, a financial power of attorney (POA) is a legal document that allows a person, known as the principal, to appoint someone else, called the agent or attorney-in-fact, to make financial decisions on their behalf.
A financial power of attorney grants the agent authority to handle a range of financial affairs, from paying bills to selling property. Financial POAs are essential in estate planning and financial management, ensuring that financial matters are taken care of according to the principal’s wishes, even if they become unable to do so themselves.
Including a financial POA in your estate plan helps avoid potential financial mismanagement and ensures continuity in handling your affairs. Having well-prepared attorney documents can provide peace of mind, knowing that a trusted person is authorized to act in your best interest.
Roles and Responsibilities of the Principal and Agent
When it comes to POA documents, there are several roles and responsibilities that both the principal and the agent must take on. We’ll cover each of these below.
Principal
- Create the Financial Power of Attorney: The principal establishes the financial power of attorney, deciding who will manage their financial affairs if needed.
- Define Agent Authority: The principal outlines the specific powers the agent will have, such as managing finances, working with an investment advisor, and handling other financial matters.
- Appoint Multiple Agents: The principal can choose to appoint multiple agents to share responsibilities or to manage different aspects of their finances.
- Designate a Successor Agent: The principal may name a successor agent who can take over if the original agent is unable to serve.
- Establish Medical POA: The principal can create a medical power of attorney to grant someone health care power if they are incapacitated. This means the agent can make certain medical decisions, such as using life-saving measures or other forms of medical care.
- Set Limitations and Guidelines: The principal has the power to set limitations on what the agent can and cannot do, ensuring their wishes are respected in both financial and medical matters.
Agent (Attorney-in-Fact)
- Act as Attorney-in-Fact: The agent, also known as the attorney-in-fact, is responsible for managing the principal’s finances according to the instructions in the financial POA. The agent is often a trusted family member, such as an adult child, who understands the principal’s needs and preferences.
- Fulfill Fiduciary Duty: The agent must act in the best interest of the principal, making financial decisions that align with the principal’s wishes.
- Manage Financial Accounts: The agent may handle tasks like managing bank accounts, paying bills, and overseeing investments, ensuring the principal’s financial affairs are properly managed.
- Sign Legal Documents: The agent may need to sign legal documents on behalf of the principal, ensuring that all transactions and decisions are legally binding.
- Comply with Legal Requirements: The agent must follow the legal requirements outlined in the financial POA, ensuring all actions are within the scope of their authority and comply with state law.
Power of Attorney Obligations to Family Members
When acting under a power of attorney (POA), the agent has a legal obligation to act in the best interests of the principal, even when it comes to decisions that may affect family members.
While the agent must prioritize the principal’s wishes and financial well-being, they should also consider the impact of their decisions on the principal’s family, especially in matters like distributing funds for household expenses or supporting dependents.
However, the agent is not required to fulfill personal or financial requests from family members unless these align with the principal’s documented wishes. The agent’s primary duty is to the principal, and they must avoid any actions that could benefit themselves or other family members at the principal’s expense.
Power Of Attorney Responsibilities and Liabilities
An agent under a power of attorney (POA) holds significant responsibilities and potential liabilities. They are required to act in the best interest of the principal, managing their finances, property, and other assigned duties with honesty and diligence. This fiduciary duty means the agent must follow the principal’s instructions, avoid conflicts of interest, and keep accurate records of all transactions.
If the agent fails to fulfill these responsibilities or acts outside their authority, they can be held legally liable for any resulting harm or financial losses to the principal. In some cases, this could mean repaying funds or facing legal action. Understanding these responsibilities and liabilities is crucial for anyone accepting the role of an agent.
As Power Of Attorney, Am I Responsible for Debts?
As a financial POA agent, you are not personally responsible for the principal’s debts. Your role is to manage the principal’s finances and obligations according to the authority granted in the POA document. This includes paying bills, managing accounts, and handling any outstanding debts using the principal’s assets.
However, if you misuse the principal’s funds, act outside the scope of your authority, or fail to manage the debts responsibly, you could be held legally liable for any resulting losses. It’s important to keep thorough records and ensure that all actions are taken in the principal’s best interest to avoid any potential liabilities.
Benefits of Having a Financial POA
- Financial Management During Incapacity
- Ensures appropriate management of finances if you become unable to do so due to illness or injury.
- Prevents the need for a lengthy and stressful court process to appoint someone to manage your finances.
- Allows a trusted person to step in and manage your finances seamlessly during incapacity.
- Convenience in Managing Affairs
- Lets your appointed agent handle financial tasks when you’re unavailable or unable to do so.
- Useful if you’re traveling for long periods, dealing with health issues, or prefer not to manage certain financial tasks.
- Ensures your bills are paid, and finances are taken care of even when you’re not around.
- Protection and Peace of Mind
- Provides legal authority to a trusted person to manage your finances, reducing the risk of financial abuse.
- Gives you and your loved ones peace of mind, knowing your finances are handled according to your wishes.
- A financial power of attorney form clearly defines the agent’s responsibilities, preventing misunderstandings.
How To Get Financial Power of Attorney in Maryland
To get a financial power of attorney in Maryland, you need to fill out the state’s official form that details what powers you want to give your agent. After completing the form, you’ll need to sign it in front of a notary public and file it at a government office. If your financial POA involves real estate, you’ll also need to file it at your local land records office. This process ensures your financial power of attorney is legally valid in Maryland.
Revoking a Financial Power of Attorney in Maryland
In Maryland, you can revoke a financial power of attorney whenever you want, as long as you’re mentally capable. To do this, you need to write a notice stating that you want to revoke the financial POA and give it to the same person you appointed as your agent. You should also inform any financial institutions who were relying on the financial POA.
It’s important to make sure everyone knows the power of attorney is no longer in effect so your agent doesn’t keep acting on your behalf after it’s been canceled. If not properly handled, this could lead to legal issues for everyone involved.
How Annapolis Estate Planning Attorney Raymond E. Brown Can Help
Annapolis estate planning attorney Raymond E. Brown has extensive experience in managing valid power of attorney documents. He and his legal team can assist you with everything from drafting a standard POA form to helping you choose the right person to act as your agent.
We can also help with updating or canceling your POA when your situation changes to ensure the financial powers of attorney expire when needed. Our goal is to make sure your estate plan is thorough and tailored to your specific needs, giving you confidence that your financial and legal affairs are well taken care of.
Call The Law Office of Raymond E. Brown Today
Creating a financial power of attorney is an important part of making sure your estate plan is complete and your financial future is secure. By setting it up now, you can avoid problems later and give yourself and your loved ones peace of mind.
If you’re interested in establishing a financial power of attorney in Anne Arundel County or the nearby areas, contact The Law Office of Raymond E. Brown today. We’re here to help you with personalized legal advice so you’re ready for whatever comes your way.
Simply call (443) 554-9944 or contact us online today to schedule a consultation and take the first step toward a secure financial future.
