A Power of Attorney is the documented designation of another to act on your behalf for specified tasks relating to financial matters. A Financial Power of Attorney enables the agent of your choosing to make cash gifts, open bank accounts, sell property and otherwise manage your financial affairs on your behalf if you are unable to or have become incapacitated. Often this power is given to a spouse with a trusted friend or relative as a backup.
Within this document, you describe the powers you give to your agent and your agent does not have any authority to act on your behalf outside the scope of those powers. Whether the Financial Power of Attorney is broad or limited, it is a crucial component of your estate plan.
Not all Financial Powers of Attorney are alike. Lacking a Power of Attorney or having one that is missing certain specific and important provisions can cause a headache for your family in time of need. For example, if an individual has a taxable estate and has been making annual gifts in order to reduce the size of the estate to minimize an estate tax, the individual’s agent could continue to make gifts on his or her behalf if the gifting power were specifically granted in the Power of Attorney. Having the appropriate language in your Power of Attorney to provide for this and other circumstances could potentially save you thousands of dollars.
A Financial Power of Attorney is a standard part of every Will package or Will and Trust package.