A financial power of attorney authorizes your agent to handle money matters on your behalf—banking, investments, real estate, taxes, and business affairs. This document ensures someone can manage your finances if you become incapacitated, travel extensively, or simply need help with financial management. Without a financial POA, family members may face expensive court proceedings to access accounts or pay bills on your behalf.
Understanding what financial POAs cover helps you create documents that meet your specific needs.
What a Financial POA Covers
Financial powers of attorney can authorize a wide range of activities: accessing bank accounts and safe deposit boxes, managing investment accounts, buying or selling real estate, filing tax returns, collecting debts owed to you, managing business interests, and handling insurance claims.
The scope depends on how the document is drafted. Broad general POAs grant comprehensive authority. Limited POAs restrict authority to specific transactions or account types. Customize based on your needs and comfort level.
Essential Powers to Consider
Banking powers allow your agent to deposit and withdraw funds, write checks, transfer money between accounts, and manage account relationships. Banks may require their own POA forms—check with your institutions.
Investment powers cover buying and selling securities, managing brokerage accounts, and making investment decisions. Consider whether your agent should have discretion over investment choices or follow predetermined guidelines.
Real estate powers include selling property, signing deeds, managing rentals, paying mortgages and taxes, and handling property transactions. Real estate POAs typically must be recorded in the county where property is located.
Special Powers Requiring Explicit Authorization
Some powerful actions require specific language to be effective. Gifting powers let your agent give away your assets—useful for tax planning but risky if abused. Many states require explicit authorization for gifts, and you may want to limit gift recipients and amounts.
Changing beneficiary designations on life insurance, retirement accounts, and similar assets is another power requiring explicit inclusion. This can be useful for estate planning adjustments but creates potential for abuse.
Creating or modifying trusts, delegating authority to others, and handling certain government benefits often require specific authorization beyond general language.
Agent Selection for Financial Matters
Your financial agent should be trustworthy, financially competent, and available to act. They'll have access to everything you own—choose someone whose judgment and honesty you trust completely.
Consider practical factors: Does the person live nearby? Are they organized enough to manage finances? Do they have time for this responsibility? Will they follow your wishes?
Name successor agents in case your first choice cannot serve. Some principals name co-agents requiring both to act together—providing oversight but potentially creating logistical challenges.
Protecting Against Abuse
Financial POA abuse is unfortunately common. Agents may steal assets, make unauthorized gifts to themselves, or simply manage funds poorly. Safeguards include requiring accountings, limiting powers, naming monitors, or requiring co-agent approval for major transactions.
Consider whether your POA should be "springing" (effective only upon incapacity) or immediate. Springing POAs provide protection against premature use but require proving incapacity when needed.
Maintain oversight where possible. Review account statements, ask questions, and stay informed about your finances even after executing a POA.
Working with Financial Institutions
Banks, brokerages, and other institutions sometimes resist honoring POAs—they fear liability if the document is invalid or has been revoked. Some institutions require their own forms or impose additional requirements.
Contact institutions where you have significant accounts and ask about their POA policies. Completing their forms in addition to your general POA may smooth future transactions.
Many states have enacted laws requiring institutions to accept properly executed POAs, with penalties for unreasonable refusals. Know your state's protections.
Coordination with Estate Planning
Your financial POA should coordinate with your will, trusts, and beneficiary designations. Powers granted should support your overall estate plan without creating conflicts.
Consider whether your agent should be able to fund trusts, change beneficiaries, or make planning adjustments. These powers can be valuable but require careful consideration.
Getting Legal Help
Financial POAs are powerful documents with significant implications. An estate planning attorney drafts documents tailored to your situation, ensures state requirements are met, includes appropriate safeguards, and coordinates with your overall estate plan. Generic forms may not provide adequate protection or include necessary provisions. For something that controls access to your life savings, professional drafting is a wise investment.