What is a financial power of attorney?


Quick Answer

A financial power of attorney is a document that designates a trusted friend, family member or attorney to handle financial decisions that a person can no longer make on his own. Without a power of attorney, family members would have to go through court proceedings to appoint a conservator to handle financial matters, according to the American Association of Retired Persons (AARP).

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Full Answer

In a power of attorney document, a person designates someone to act for him, if circumstances warrant. The principal, or the person drawing up the document, specifies an agent to handle things like bank accounts, stocks and real estate. The amount of power the principal gives the person acting on his behalf, called the agent, is up to the principal.

There are a few different kinds of powers of attorney (POA). A conventional POA begins when the principal signs the document and ends if and when the person becomes incapacitated, reports the AARP.

A durable power of attorney begins when it is signed and can only be canceled by the principal. This means it remains valid throughout the principal's lifetime. The principal goes on managing his own affairs until he becomes incapacitated and then the agent takes over.

A springing POA begins when the principal becomes incapacitated. These are difficult documents to draft because it may be hard to determine when a person is incapacitated and not able to handle his own financial affairs.

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