A power of attorney (POA) is a legal document that allows you to appoint a person as your agent to make decisions for you. A financial POA gives your agent the authority to make financial decisions and transact financial business for you. A financial POA is a powerful legal tool that has numerous benefits. However, it is very important to choose the correct financial POA for your situation.
Before you decide to execute a Power of Attorney, you need to consult with an experienced Michigan estate planning lawyer. Our attorneys are happy to answer questions about the pros and cons of financial POAs so that you can choose the best option to meet your needs.
The Three Types of Financial Powers of Attorney
There are three basic financial powers of attorney you can choose — Limited Power of Attorney, General Power of Attorney, and Durable General Power of Attorney. Our Michigan probate attorneys can help you choose the POA that satisfies your goals and protects your best interests.
Limited Power of Attorney
A Limited POA, also referred to as a Specific POA, authorizes your agent to act on your behalf in a specific financial transaction. The agent is only permitted to transact business for that specific purpose and only according to the terms you outlined in the POA. For instance, you may appoint your spouse as your Limited POA to represent you during the purchase of your new home because you are unable to attend the closing. Your husband is only authorized to sign documents to purchase that specific property. You may also authorize your agent to sign mortgage documents.
The key to a Limited POA is to be as specific as possible when drafting the document. In the example above, we would specify the property address, purchase price, mortgage company, mortgage amount, and any other terms or conditions that would be needed to limit the authority granted by you to that specific transaction.
General Power of Attorney
A General POA gives your agent the authority to transact business in your name that you could legally transact yourself. Examples of transactions your agent may perform include but are not limited to:
- Buy and sell real estate;
- Buy and sell personal property;
- Open and close financial accounts;
- Transfer and withdraw funds from accounts;
- Buy and sell stock;
- File and settle lawsuits;
- Enter and reject contracts;
- Pay bills and living expenses;
- Prepare and file tax returns; and,
- Make investment decisions.
In other words, you give your agent complete authority to transact business in your name. A General POA ends upon your incapacitation or death. You can also rescind the POA if you decide to withdraw the agent’s authority to act on your behalf.
Durable General Power of Attorney
A Durable General POA authorizes your agent to act on your behalf in any financial transaction except it does not end with your incapacitation. Your agent retains the authority and power to act on your behalf if you become ill, you are unconscious, or you otherwise cannot make decisions for yourself because of a mental or physical impairment.
Reasons Why You Might Want to Consider a Power of Attorney
Granting another person authority to act on your behalf in financial matters can be a bit frightening. You trust that this person will act in your best interest when making financial decisions. Therefore, you must choose an agent you know will act in your best interest and who understands your desires regarding financial matters.
Some advantages of appointing a financial POA include:
- Avoids the need for a conservator to be appointed by the court if you are unable to conduct business for yourself because of an incapacitation. You choose who will make financial decisions for you instead of the court choosing someone.
- Allows children to pay bills and living expenses for elderly parents. Children can also keep a watchful eye on financial accounts to protect against financial elder abuse.
- Provides the opportunity for family members to discuss desires regarding financial matters. You should always discuss your intentions with your agent to ensure your agent will act according to your wishes.
- A financial POA can prevent legal battles over intent. When you execute a financial POA, you are taking a very specific legal action to authorize a person to act on your behalf. The witnesses to your POA can confirm that you appointed this specific person as your agent, you appeared to be in your right mind and understood what you were executing, and you did not appear to be under duress. This evidence can be important if your family members disagree about your wishes and you are unable to speak for yourself.
- Allows your agent to communicate with financial institutions and other agencies on your behalf. For instance, if you are out of town and lose your wallet, your agent can access your accounts from your home computer to cancel the accounts. Your agent can go to the bank to transfer assets into new accounts to prevent fraud. If an elderly parent cannot balance his or her checking account, you can work with the bank to determine the error.
There are many advantages of using a financial POA. However, you must exercise extreme caution because you are granting another person an enormous amount of authority over your assets and finances. Our Michigan estate planning attorney can discuss a financial POA in more detail during a consultation to determine which option meets your specific needs and goals.
Call a Brighton Estate Planning Attorney for More Information
Contact The Elder Care Firm of Christopher J. Berry, CELA by calling 888-390-4360 or by using the contact form on our website to schedule a consultation with an experienced Michigan probate law attorney. Our main office is in Brighton, but we have satellite offices in Bloomfield Hills, Livonia, and Novi to better serve our clients.