Financial Power of Attorney
What is It?
A Financial Power of Attorney ("FPOA") authorizes an individual or firm to act as your agent in relation to the specific financial activities listed in the FPOA document. It is important to note however, that a FPOA only "authorizes" the agent to act; it does not "require" the agent to act.
A FPOA can be either durable or springing. A durable power of attorney is effective when signed. A springing power of attorney comes into effect upon the happening of an event described in the document, such as the certification by one (or two) physicians of your incompetency. The document can also specify when the FPOA terminates although, even if the document does not mention termination, a FPOA does terminate upon your death.
Why is It important?
Only an individual or firm owning property, or a properly authorized agent of the individual or firm, can undertake transactions involving that property. If you are unable to manage your financial affairs due to illness or incapacity, or if you need another person to finalize a transaction on your behalf because you cannot do so personally, then a FPOA can ensure that your financial affairs are handled when and as needed.
Most trusts (but see our white paper on "Directed Trusts") provide their trustees with the ability to manage the property owned by the trust. Trustees are required to act in accordance with the terms of the trust and will be held liable if they do not follow the instructions. This is in contrast with agents acting under a FPOA that merely authorizes, but cannot compel, actions. However, the problem with relying only on a trust to ensure that proper actions are being taken with respect to property is that the trustee is empowered to act only with respect to property that the trust owns. A separate FPOA should always be executed in relation to property that is intentionally or unintentionally left outside the trust.
Should my FPOA be Springing or Durable?
If the FPOA relates only to a particular transaction, then it should clearly state the specific transaction, the property to which it applies, the authorized actions the agent can take, and the dates of activation and of termination of the power. If the FPOA is durable (meaning it is effective when signed until terminated), your agent may take actions you do not agree with, but you are nonetheless bound to honor. We typically recommend our clients execute springing powers of attorney so that, until the event occurs that causes the FPOA to "spring" into effect (the "catalyst"), our clients have full control over their financial affairs. On the other hand, delays can arise if the FPOA is "springing" and the agent has difficulty proving that the catalyst for the FPOA has occurred.
Who Should my Agent Be?
Perhaps the most important issue is who should be named as your agent. Whomever you select should be a person or firm in which you have the utmost trust. In addition, you should determine whether the person or firm has the expertise to properly make decisions about the matters you have listed in the document. You should also name an alternative agent in case the original individual agent is on vacation, ill or the firm you have named has closed. Always be careful that there is no temptation for an agent to enrich themselves or others.
What powers should be included in the FPOA?
Most states, including Idaho, have a statutory form of power of attorney that is accepted by the financial institutions in their states. The forms provided are merely a starting point. For your particular goals, powers in addition to those suggested in a 'check the box' format in the form may be appropriate. Also please note that, despite using the statutory form, some financial institutions raise issues that create delays, so it is best to have your financial institutions review the form prior to the time it is needed.
Do I need to do anything if I revoke my FPOA?
Yes, it is very important that anyone who has knowledge of the FPOA be notified, preferably in writing, that it has been revoked.
How We Can Help You?
Mathieu, Ranum & Allaire, PLLC prepares Financial Power of Attorneys for our clients as a part of every estate plan and when and as needed for particular transactions.