A financial and property power of attorney authorizes your agent to manage your property and personal finances if you become incapacitated. Your state's laws will generally determine the items your agent will have control over with a financial power of attorney. Many states require that certain authorizations, like making gifts and changing beneficiaries, be specifically granted.
A financial power of attorney is a helpful and often-used estate planning document. It is invaluable for ensuring a period of incapacity doesn't result in bills and taxes going unpaid. It enables you to select a responsible person you trust to manage your financial affairs, pay your bills and manage your property. It also protects you from the possibility of the court appointing the wrong person – or even a complete stranger – to oversee your finances.
Financial powers of attorney can become effective at two different times. The most typical is the “springing” power of attorney, which becomes effective at your medically declared incapacity, usually by two doctors. Financial powers of attorney can also be effective immediately upon signing. An immediate power of attorney is used when the principal currently needs assistance with their financial affairs.
A financial power of attorney can either be limited or general. A limited power of attorney is either for a specific transaction, specific authority or a specific time period. A general power of attorney will apply to all of the property owned by the decedent. For estate planning purposes, a general power of attorney is usually prepared. A general power of attorney remains in force until it's revoked, replaced or the principal dies. The authority granted by a financial power of attorney ends with your passing.
The principal must have capacity when a power of attorney is signed. Unless it includes some very specific language, a power of attorney is not valid once the principal is declared medically incapacitated. As a result, for estate planning purposes, a financial power of attorney needs to be “durable.” A “durable” power of attorney is one under which the authority continues after a medically declared incapacity. A durable financial power of attorney avoids the need to have a conservator appointed if the principal becomes incapacitated.