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What is a power of attorney?
A power of attorney is a legal document which authorizes an agent to make decisions on behalf of the principal, in his absence of or during his incapacity. To be effective, a power of attorney must be signed and notarized. It can also be signed by two witnesses, in lieu of notarization.
In California, there are two types of power of attorneys. One is a healthcare power of attorney which allows someone else to make medical decisions on your behalf. For more information, Click Here.
This page is dedicated to discussing the second type of power of attorney: the Financial Power of Attorney.
What is the financial power of attorney?
The financial power of attorney (FPOA) is a legal document which gives a third party (attorney in fact) the authority to make financial management decisions for you. The FPOA is usually "durable" and "springing". It does not become effective until a future event happens such as incapacity and will continue to be effective even after incapacity.
Can a financial power of attorney be used instead of a will to administer my estate?
No. The FPOA terminates at the death of the principal so a power of attorney cannot be used to administer your estate.
Can my agent thoroughly manage my finances?
There are certain actions that the agent must be given express authorization to do such as create, revoke or amend a trust. There are also actions that the agent is specifically prohibited from taking under the California Power of Attorney Law.
What happens if I do not have a financial power of attorney?
If you become incapacitated without a power of attorney, then a conservator will have to be appointed by the court to manage your finances until such time that you regain capacity. A conservatorship hearing will be held which could mean a lengthy and expensive court process. Executing a power of attorney will remove the necessity for any court proceedings or the appointment of a conservator.
To further avoid the possibility of a conservatorship hearing, a successor agent should be named in the FPOA to step in if the primary agent is unable or unwilling to to do it.
I have a will, do I need to also have a power of attorney?
Yes, it is highly recommended that you execute a power of attorney when you have a will. A will does not become effective until the death of an individual and therefore cannot be used to manage your affairs during your lifetime if you were to be incapacitated. Because a power of attorney terminates at death, having a will and an advance health care directive will ensure that your affairs, both financial and medical, will be handled in all stages of life and death. See Wills and Trusts and Health Care Directives for more information on these documents.
I have a living trust, do I also need a financial power of attorney?
Yes. A trustee has the authority to make decisions concerning your trusts assets such as selling trust property but has no authority to manage your non-trust assets such as joint tenancies or life insurance policies. Therefore to ensure that all your assets can be effectively managed, a FPOA should be executed. If you want the trustee to be the one making all financial decisions, you can just name him as the agent of your FPOA.