General Facts You Should Know About Power Of Attorney Documents
Executing a power of attorney for financial reasons gives another person or persons the right to act on your behalf if you become ill or go away and are unable to handle your financial and/or business affairs on your own. The powers you give your agent, or attorney-in-fact, can be broad or limited. Power of attorney documents can be confusing, particularly since there are different types; therefore, it may help to obtain some general facts about how they work.
Date It Goes Into Effect
A power of attorney goes into effect when you sign the document in the presence of two witnesses and a notary. Once the document is signed and the notary places an ink stamp or embossed seal near his or her signature, the power of attorney is valid. The power of attorney document may instruct the person or persons you legally authorize to make broad or specific decisions for you not to use it unless you are unable to act for yourself.
Durable Power of Attorney
While a power of attorney may grant general authority to an attorney-in-fact while you are still cognitively capable of expressing your wishes, a durable power of attorney is effective even if you become mentally incompetent. If that's what you want, the document must state that the power you give the agent will not be affected if you become physically debilitated or mentally incompetent.
Springing Power of Attorney
If you sign what is known as a springing, or conditional, power of attorney, the document gives the attorney-in-fact you appoint specific or limited authority when the particular circumstance you name occurs. The power of attorney document should state a detailed description of the triggering event. If you are giving someone legal rights should you become physically or mentally incapacitated, your power of attorney document should be clear on the standards for determining those circumstances.
Your attorney-in-fact can make charitable contributions for you, but only if you specify it in the power of attorney document. Including a gifting clause reduces the risk that your agent will misuse your money. The document can include to what nonprofit organizations contributions can be made, in addition to how much money can be gifted to each charitable cause.
Power of Attorney Update
The laws in some states do not automatically revoke a previous power of attorney if you draw up a new one. You must have your attorney execute a document revoking the previous power of attorney. Your bank or other financial institution will then need copies of both the revocation and your updated power of attorney.
Keep in mind that if you relocate to a different state, your current power of attorney may not be effective there. In some states, a durable power of attorney must be filed with the local government.
Even if you don't move, it's a good idea to re-execute your power of attorney every few years, Sometimes banks and other financial institutions will not honor a power of attorney document that is several years old. Often, there is concern that the power of attorney was revoked at some point in the past, but the bank wasn't notified.
For more information, contact Tracy McMurtrie Luck & Associates or a similar firm.