A financial power of attorney gives another person the power to handle that person’s financial matters. The power of attorney can either designate that the attorney-in-fact’s authority begins immediately after it is executed or that such authority will “spring” into effect at a future date or upon a particular event. Usually, the springing event is when two examining physicians determine that the principal is no longer competent. Before choosing a “springing” power of attorney, it is important to consider the need for the agent to show proof of the event. However, such powers always terminate upon the death of the principal.
Commonly, financial powers of attorney are used to assist elderly people in paying their bills and addressing any other financial matters. Use of such a document is superior to naming family members as joint holders of bank accounts, as such a method could give the family member’s creditors access to such accounts in collection proceedings.
Finally, when possible, it is preferable to use a limited specific power of attorney for a specific purpose. For example, a real estate power of attorney would often be limited to a particular parcel of real estate for a specific time. This is important as such powers of attorney are usually recorded along with the documents executed by the agent on behalf of the principal. If recorded, the power of attorney becomes a public document, which allows anyone to view and obtain a copy of the power of attorney. If the power of attorney is limited in scope, it is of little use to anyone else. If it contains many broad powers, it can be misused in a manner similar to many identity theft schemes.