What Are the Responsibilities Of a Financial Power of Attorney?
A financial power of attorney plays a pivotal role in making different types of financial decisions on behalf of a loved one. This is usually required in cases where the loved one is incapacitated or is unable to make decisions on their own.
In general, a financial power of attorney is selected on the basis of their financial knowledge and capacity for handling the role. You should consult with a trusted estate planning attorney regarding the responsibilities of a financial power of attorney.
Overview of Financial Power of Attorney
Financial power of attorney plays an integral role in your estate plan. They are granted the authority to handle financial matters. Financial power of attorney or Attorney-in-Fact steps in whenever the estate owner is unable to make financial decisions because of absence, death, or incapacitation.
Durable financial power of attorney is used in cases where the power of attorney can act even after someone becomes incapacitated or is unable to express their will. Financial power of attorney has the authority to handle and make decisions covering all financial matters in your life. This can be both personal and business.
Financial Power of Attorney Acts as a Fiduciary
All decisions made by the power of attorney have to be made in the best interests of the assignor. This means that the property and financial decisions should be for the benefit of that individual and nobody else.
A financial power of attorney can request a commission for the work performed on behalf of the individual. However, they are not legally allowed to make decisions that benefit them in any way.
Making Financial Decisions within their Role
The role of a power of attorney is clearly defined within the documentation that is filed for establishing it. The financial power of attorney should read through the documentation to gain a clear understanding of the type of accounts, property decisions, and assets that need to be managed. The power of attorney should refrain from going outside the boundaries mentioned in the legal documents.
For instance, if the power of attorney is expected to handle a specific type of debt from a particular account listed for covering the debt, they should not attempt to pay off the debt from other accounts or by selling assets under their care. Instead, the power of attorney should contact the individual they are representing (if possible) to obtain permission to use other methods for satisfying the debt.
Keeping Accounts and Assets Separate
It may make sense to combine funds, accounts, and assets within a single umbrella for managing everything in a more centralized manner. However, this opens the power of attorney to additional risks. It may also create liability in case a dispute arises in relation to asset and fund ownership. The financial power of attorney designee should make sure to keep their assets separate from the ones that they are managing.
The power of attorney may use their own assets or funds to handle certain responsibilities and later claim reimbursements. For instance, if debt exceeds the funds provided as per the legal documentation, the power of attorney may decide to pay the funds out of their own pocket. They may choose to reimburse themselves at a later stage when funds are more readily available.
It’s vital to understand that this is neither required nor against the law. However, where personal funds are used for caring for the power of attorney duties, it is necessary to keep the receipts that show a paper trail of the transactions.
Documenting All Financial Transactions
A financial power of attorney should maintain ledgers of all financial transactions of their representatives. This will protect them from liability. It will also make it easier to track duties and decisions.
It can be daunting to choose a suitable person to serve as financial power of attorney. In relation to this, you may want to take the time of ensuring that you are confident in your decision. You should be able to trust the person you name to carry out their duties in this role if/when the time comes.
The main consideration while deciding on a financial power of attorney is trust. You are basically placing someone else in charge of your financial security and livelihood. This makes it extremely important to choose wisely. An experienced estate planning attorney can help you with this decision and the process of creating the necessary legal documentation.
Legal Advice is Available from Reputable Estate Planning Attorneys
The seasoned estate planning lawyers at John H. Ruby & Associates can offer you the right legal guidance whether you are assigned the duties of a power of attorney or you are someone that needs to set up a financial power of attorney.
We can ensure the proper execution of responsibilities by drafting the required documents in a clear and concise manner. Call us at (502) 373-8044 or write to us online to set up your complimentary consultation with us today.