A power of attorney for financial management or asset management is a document that names someone that you know and trust to manage all of your finances and assets if you cannot manage them on your own anymore in the future for some reason. That person is called your “agent” or your “attorney-in-fact”.
Springing Durable Power of Attorney
For the power of attorney for financial management to work correctly this way, it should be a “springing” power of attorney, with language that states the agent becomes empowered when you cannot manage your affairs anymore. The power of attorney also must contain language that its effectiveness is not impacted by your inability to manage your affairs. This language is what makes a power of attorney for financial management “durable”, as in a “durable power of attorney”.
Provide Control of Assets in Your Name
These powers apply to all of your finances and assets that are titled in your name as an individual and not as trustee of a trust, etc.
Limited Power of Attorney
The power of attorney for finances can provide essentially all authority to manage all of your financial affairs and assets. Or it could be limited in scope to authorize the named person to do only a specific thing, called a “limited power of attorney”.
Certain Powers Must Be Stated to Be Effective for Financial Management
The power of attorney for financial management document needs to state expressly that your agent has the following powers if you want your agent to have these powers:
- Create, modify, or terminate a trust for you;
- Transfer your assets to your existing trust;
- Make a gift of your property to someone else;
- Make decisions about an inheritance you may receive;
- Change the way that bank financial accounts and other assets may automatically transfer at your death;
- Be able to make a loan of your assets to himself or herself.
To enable your agent to modify or terminate your trust (number 1), the trust document also needs to contain language indicating the agent named in your power of attorney may amend or terminate your trust. Each power of attorney for financial management and the trust need to have that reciprocal language. If you want your named agent to be able to do any of these six things, the power of attorney for financial management document must specifically say so.
Avoid a Conservatorship Court Proceeding
Without a power of attorney for financial management, the court may become involved with your financial affairs at some point through a conservatorship court proceeding if you become unable to manage your financial affairs.
Contact Meinzer Law Firm, P.C., in Torrance to assist you with your estate planning so someone that you know and trust can handle your finances and assets if you cannot do it anymore in the future for some reason.