You’ve worked hard for what you have. Understandably, you may be uncomfortable with the idea of giving someone else control of your assets. But what happens if you’re suddenly incapacitated and unable to manage any of your financial affairs?
If you have a financial power of attorney, a trusted person will step in to handle your financial matters. You’ll choose a designated agent to handle your finances in the event that you become unable to. This is an important part of every estate plan, but it’s not something you should rush into creating. The first step is choosing the right financial power of attorney lawyer for the job.
What Is a Financial Power of Attorney?
A financial power of attorney (POA) is a legal document granting someone else the power to handle your finances on your behalf.
Most lawyers suggest that their clients include a financial POA among their estate planning documents to allow a trusted person to step in if the client becomes unable to make their own decisions. The POA will primarily concern two parties:
- Principal: The person granting someone else the authority to manage their finances
- Agent (or Attorney-in-Fact): The person granted that authority through the POA
A Texas financial power of attorney lawyer can help you create a document that authorizes your agent to perform specific tasks for you, and you can make the scope of your financial power of attorney as broad or as narrow as you’d like.
These are some of the types of financial decisions and duties your chosen agent may take on:
- Use your funds to pay your bills and other routine expenses
- Handle real estate transactions on your behalf
- File and pay your taxes
- Manage your businesses or hire someone else to do so
- Make investment decisions for you
- Purchase insurance for you
- Collect government benefits like Medicare and Social Security
- Manage your retirement accounts and other investment accounts
- Handle any other financial decisions you would make if you were not mentally incapacitated
Your agent will have a fiduciary duty to you. This means that they are legally obligated to act in your best financial interests at all times.
Why You Need a Lawyer for a Financial POA
You can find contract templates, ready-made wills, and other legal documents online. So naturally, you might wonder, “Do I need a lawyer for financial power of attorney?”
It’s not illegal to create a power of attorney (financial or otherwise) on your own. However, a skilled lawyer will offer far more valuable benefits than just drawing up your legal documents.
Helping You Choose the Right Agent
It’s difficult to find the right person to serve as your agent, especially when this decision carries emotional weight and may affect your family dynamics. Estate planning attorneys can help you look at your options with an objective eye. They’ve helped many other clients create financial powers of attorney and can guide you in selecting the right person.
Protecting You From Financial Abuse
A financial durable power of attorney gives your agent authority to handle most financial matters. Agents don’t always follow their fiduciary duty, so having a well-worded document is a wise safeguard against potential fraud or financial abuse.
Making Sure Language Is Clear
If you lose your mental capacities, you want to make sure your agent understands exactly what they are authorized to do. Unclear language like “I authorize [agent] to handle my finances” can lead to confusion. Your attorney knows how to write a clear POA that leaves little to no room for interpretation.
Tailoring Your POA to Your Needs
Your attorney can discuss your situation and create a POA that’s designed for you.
If you’re looking for a financial power of attorney lawyer, Texas has no shortage of options. However, you shouldn’t just search for “financial POA attorney near me.” Take your time to research attorneys and choose one you feel comfortable with.
Types of Financial Powers of Attorney in Texas
Once you have found the best lawyer for financial power of attorney, it’s time to create your financial POA. Your attorney can explain your options during your consultation. Before you meet, however, it may be helpful to have a general understanding of the types of financial POAs available to you.
Durable Power of Attorney
A durable power of attorney (also called a statutory power of attorney) is what most people think of when they imagine a power of attorney.
This document is effective immediately after it is signed, giving your agent powers to handle certain affairs right away. In this context, “durable” indicates that your agent’s ability to handle your affairs will continue after you become incapacitated.
This means that if you are unable to manage your finances, your agent can immediately step in and start paying bills and handling other key financial affairs. There’s no waiting period or authorization process.
Some people choose to create very broad durable POAs that authorize their agents to handle financial affairs, healthcare decisions, and legal matters. However, a durable power of attorney can also be customized. If you wish, you may limit the scope so it is exclusively a durable financial POA.
Springing Power of Attorney
A springing power of attorney does not go into effect right away. Just like with a durable power of attorney, a springing power of attorney can give your agent authority to manage healthcare decisions, your finances, or just about anything else.
When you create this document, you specify what events may cause it to “spring” into effect. For example, many people stipulate that two medical professionals must confirm that they are unable to manage their day-to-day affairs.
A springing power of attorney might sound ideal at first. Unlike a durable power of attorney, it does not grant your agent the immediate right to manage your finances.
However, in practice, springing powers of attorney often cause serious delays. You may have to go through a court proceeding or have doctors verify that you’re mentally incompetent in order for the POA to take effect. Both of these take time, and during that time, there will be no one to attend to your financial matters.
General Power of Attorney
A general power of attorney allows someone to manage your finances and other affairs. However, it’s rarely used in the context of estate planning. That’s because, unlike a durable power of attorney, a general power of attorney is voided when the principal becomes incapacitated.
Creating a Financial POA
Your financial power of attorney lawyer can walk you through creating a financial POA. Here’s a quick overview of the process in five steps:
- Choose your attorney
- Determine the best type of financial POA for your needs
- Choose your agent
- Work with your lawyer to create financial POA documents
- Sign your POA in the presence of a notary public
Once you have completed your power of attorney, give a copy to each financial institution your agent may need to work with. This gives each institution the chance to confirm the validity of your POA.
You also should make sure your agent receives a copy and that you keep one for yourself. Like any other estate planning document, your financial POA should be periodically reviewed. If your situation changes or you otherwise want to make an update, your lawyer can help you create a new document that better suits your needs.
Key Legal Requirements in Texas
Each state has its own set of laws concerning powers of attorney. In order for your financial power of attorney to be legally valid in Texas, you must meet the following requirements.
Be of Sound Mind When Creating the Document
A power of attorney document grants considerable power to your agent. For the document to be valid, you must be mentally competent, at least 18 years old, and able to fully understand the significance of a power of attorney.
Use Clear and Precise Language
To prevent confusion, Texas state law requires that financial powers of attorney include certain statutory language. A financial power of attorney lawyer can ensure that your document has the requisite language.
Notarize the Document
For your POA to be valid, it must be signed in the presence of a notary public.
File With the County Clerk (if Your Agent May Manage Real Estate)
Not all financial power of attorneys must be filed with the court. However, if your agent has the authority to conduct real estate business on your behalf, you must file the document with the clerk of the court. You must do this in every county where you own property.
The Agent’s Powers and Legal Responsibilities
The exact powers granted to your agent will depend on the wording of your POA. For instance, you might choose someone to handle property and financial decisions, or you might want to limit the scope of your POA to paying your routine bills and filing your taxes.
A power of attorney may grant your agent considerable power, but it also comes with the following considerable responsibilities.
Acting in Your Best Interests
Your agent is obligated to make financial and legal decisions that are in your best interests.
Following the Terms of the POA
Your agent must act only in the capacity that the POA allows them to. They aren’t legally allowed to assume more authority than you’ve granted them.
Keeping Records
Transparency is an important part of any financial agreement. Your agent must keep clear, thorough records of all transactions made so you can review them should you regain mental capacity.
Understanding Legal Accountability
Before agreeing to serve as your agent, the person you choose should understand the gravity of what they’re taking on. If your agent violates their fiduciary duty, oversteps their authority, or otherwise violates the terms of your POA, they may be held liable.
Are You Ready to Create Your Financial Power of Attorney?
The team at Hunter Sargent, PLLC, understands that giving someone authority over your financial transactions is a sensitive process. We treat each client with understanding and respect while creating their customized estate plan.
Our team has helped Texans build their legacies for seven generations and counting, and we hope to help you build yours, too. Contact us today to request a meeting.