The basics

Durable power of attorney for finances is a document which appoints someone to handle the financial matters of another person even when they are incapacitated. It is different from the regular power of attorney exactly because it is in effect even when the person is incapacitated. The signer of the Power of Attorney is called the principal and the person who is appointed is called the agent.

For the financial power of attorney to become effective the principal and agent complete the form and date it and sign before a public notary or two witnesses who must not be related to either of the parties. In the state of California, there is no witness requirement if the document is executed in front of a notary public.

The monetary affairs that the agent can handle can include real estate, tangible personal property, stocks and bonds, insurance and annuity, retirement plan, estate, trust and beneficiary transactions, tax matters, etc.  This is especially important for individuals who have become incapacitated and have accidentally left a valuable asset outside of their trust. The Power of Attorney allows the agent to transfer the asset into the person’s trust, thereby avoiding a costly probate proceeding.

The agent is authorized to be reasonably paid for performing the duties specified in the power of attorney document.

The principal has the right to change the capacities of the agent by executing a new power of attorney for finances or amendment to the original document. The durable power of attorney can also be revoked. POA is void only in the case of death of either principal or agent, revocation or execution of a new power of attorney.

These are just the essentials. Here are some of the most common questions and misconceptions related to POA which will clarify the concept further.

Does the principal have to be legally incompetent for POA to be signed?

It is widely believed that a person has to lose their competence to make legal decisions for power of attorney to be signed. It’s quite the opposite.
If a person can no longer make legal decisions, then he or she is unable to sign any kind of legal documents, including the power of attorney form. What can be done is to take the matter to court for conservatorship or guardianship, but this option requires incomparably more money and time to finalize than executing power of attorney while the signer is able and legally competent.

Can power of attorney be executed without an attorney?

Yes, it is possible to find a power of attorney form on the internet, complete it and sign it without the help of a legal professional. It is possible, but it’s not recommended. Online POA forms can be outdated or incomplete and they can also lack the specifics that are unique for your case.

It is important that all the elements of the durable power of attorney for finances be clearly and unambiguously specified in the document to preclude challenges and problems.

Can the agent act as they like once they have the durable power of attorney?

The law implies that the agent has a fiduciary obligation to act in the best interests of the principal. This obligation isn’t stated explicitly in the form, and doesn’t have to be, because the law implies it. The agent doesn’t have the right to act in a way that goes against the interests of the person who granted them the power.

This doesn’t mean that it’s unimportant who is chosen as the agent. It is strongly recommended that signers chose a person of integrity and trust as their agent. It is desirable that the agent be astute in business matters, but that is of secondary significance in comparison to their character. If they need help understanding financial matters, they can easily get it from a professional.

Is there a fixed set of powers that are granted within durable power of attorney for finances?

There are a general and a limited power of attorney.

The general power of attorney means everything connected to managing the principal’s assets, but the wording of the powers is specified in the document. Limited or special powers can be granted for the sale of a piece of real estate property, for example.

Ideally, the power of attorney document will be custom drafted to include all the specifics of the situation. The help of a legal professional is needed not only to specify in detail the powers granted on the agent, but also to align the document with all the regulations, some of which can be state-specific.

In California, the power to accept, receive and disclaim gifts is not implicitly granted to the agent under the general power of attorney. This power, together with the power to create a trust for the principal, must be expressly outlined in the document.

If you are thinking of appointing an attorney-in-fact (an agent) or if someone is considering making you their agent, it would be best to contact a San Diego law office that specializes in trusts and estate planning. Call us today for a free 30-minute consultation and get the opinion of an expert!