A financial power of attorney (“POA”) is a legal document used to appoint another person, called an agent, to act on your behalf regarding financial and business matters. This type of POA does not authorize the agent to make health care decisions for you.
Typically, a POA is used when an individual is unable to handle his or her own affairs. It can also be utilized when an individual has significant affairs that need to be delegated to ensure they are all completed. A principal can name one agent, or multiple co-agents, each of whom can act alone, or however the POA provides. Importantly, as long as the principal has sufficient mental capacity, he or she can change or revoke their financial POA.
The Scope and Duration of the Agent’s Authority
The POA will often indicate when the agent’s authority begins. If the POA does not state when the powers begin, the agent can act immediately. Some POA documents state that the agent’s authority will “spring” into effect at a later date or upon a particular event (often when the principal loses mental capacity). However, because of the difficulties associated with proving mental incapacity, and because no one can predict the future, it is generally advisable to allow the POA to take effect immediately.
A POA can be of limited time or power. For instance, an agent can be named POA for the sole purpose of handling another’s financial affairs while he or she is out of the country for an extended period. The POA will be in effect only for the time period of the trip. Other POA’s can be of limited power, such as a POA that is only for the express purpose of changing the title on an automobile.
Once the powers are granted, the agent must act in the principal’s best interest, and only within the scope of the authority provided in the POA. Also, an agent must act in a way that preserves the principal’s estate plan, particularly if the agent knows about the plan. For this reason, the principal should tell the agent about his or her plan and provide the name of the attorney who prepared it. Unless stated otherwise in the POA document, the agent must also act loyally, cooperate with the principal’s health care agent, avoid conflicts of interest, and keep accurate records of all acts performed under the POA.
Generally, the principal determines the scope of the agent’s authority. To that end, certain powers are automatically excluded from the scope of authority unless expressly granted. For example, Ohio law provides that, unless the powers are specifically granted, an agent cannot:
- Give away the principal’s property;
- Change beneficiary designations;
- Change rights of survivorship;
- Create a trust for the principal or make changes to an existing trust;
- Let others act in place of the named agent; or
- Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
This is because such powers are the types that are most likely to be abused. Although the principal has the right to grant one or more of these powers in their POA, it is generally unadvisable.
After the POA is executed, an agent’s authority will end when the POA states that it will end or when the principal revokes the POA. If the POA does not include a specific end date, then the agent’s authority will end only when the POA is revoked or when the principal dies. Importantly, an agent can never act after learning of the principal’s death.
Because financial POAs provide agents with significant powers and authority, it is always best to speak with an attorney when preparing your POA document. Your attorney can then assist with creating a POA that best protects you and your finances during your lifetime.
This article is meant to be utilized as a general guideline for financial power of attorney. Nothing in this blog is intended to create an attorney-client relationship or to provide legal advice on which you should rely without talking to your own retained attorney first. If you have questions about your particular legal situation, you should contact a legal professional.
Mark Turner and Cindy Menta can be reached at [email protected], or by phone at 440-571-7773.
You may also be interested in: Knowledge is Power: Understanding the Different Powers of Attorney
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