What Is a Financial Power of Attorney and Do I Need One?

There are two primary categories of power of attorneys in the United States, including in the state of California: medical power of attorney and financial power of attorney. You may be wondering whether you are at a juncture in your life at which you should create a financial power of attorney.

There are a variety of factors that you need to bear in mind when it comes to a financial power of attorney. These include determining what specific type of financial power of attorney will meet your needs and how you should obtain this legal instrument.

Overview of a Financial Power of Attorney

A financial power of attorney is a legal instrument that allows you the ability to grant authority to another person to tend to your financial affairs. There are two types of financial powers of attorney. There is a nondurable financial power of attorney and a durable financial power of attorney.

A nondurable financial power of attorney is one that ceases to exist if you become incapacitated. A durable financial power of attorney is one that remains in force if you do become incapacitated. Incapacitation generally is defined as a physical or mental condition that renders it impossible for you to make decisions on your own.

Every state has its own laws governing the creation of a financial power of attorney, including California. In order for a financial power of attorney to be effective, the content and structure must comport with the applicable statues and regulations of the state in which the creator of the instrument resides. This includes witness requirements, which in California present two options. A financial power of attorney can be witnesses by a notary public. In the alternative, a financial power of attorney can be witnessed by two individuals who are not named as the agent in the instrument.

Financial Power of Attorney When You Are Not Incapacitated

As mentioned a moment ago, a nondurable financial power of attorney is one that is put into effect and remains in place until you lose your capacity to make decisions yourself. You can also terminate this type of financial power of attorney in a number of ways, including placing a specific termination date in the instrument itself. For example, if you will be traveling abroad and want someone to tend to your financial matters while you are aware, you can create a nondurable power of attorney with a specific termination date.

Financial Power of Attorney When You Are Incapacitated

Another type of financial power of attorney is one that takes effect if you are no longer capable of dealing with these matters because of a physical or mental disability or limitation. This type of instrument technically or legally is known as a durable financial power of attorney.

If you become mentally incapacitated, you will lack the legal ability to terminate this type of power of attorney. A durable financial power of attorney will also terminate when the person who creates it died. The termination of such an instrument can occur through judicial action as well.

In most situations, when a durable power of attorney terminates because of judicial action it is because a conservatorship has been created by the court. In basic terms, a conservatorship takes the place of a financial power of attorney. A conservator has similar powers to the agent established in a financial power of attorney. A conservator acts with the oversight of the court.

How to Obtain a Financial Power of Attorney

You’ve three primary options through which you can obtain a financial power of attorney in California and the United States. First, you theoretically can draft a financial power of attorney on your own. Unless you’ve at least some legal or appropriate financial background, taking this step can prove a risky exercise.

Second, there are an array of resources through which you can obtain financial power of attorney templates and forms. Finally, a lawyer can prepare a proper financial power of attorney for you.

In order to best ensure a financial power of attorney appropriately is created, the best course to take typically is retaining an attorney to prepare the instrument. In most cases, the creation of this type of legal instrument by a lawyer is not a costly endeavor. Overall, preparing a financial power of attorney is not that complicated of a task for a qualified lawyer. In many cases, an estate attorney prepares a financial power of attorney, usually in durable form. Thus, it is a power of attorney that only takes effect if you are not able to manage your financial affairs.

Generally speaking, a lawyer will schedule an initial consultation to discuss a financial power of attorney with you. Usually there is no charge for such an appointment. If you want to undertake broader estate planning, this is a matter that can be included as part of that process.