9 Tips to Consider When Drawing Up Your Power of Attorney

A Power of Attorney (POA) gives another person the authority to act on your behalf when it comes to your legal and financial matters. Speaking with an estate planning attorney is highly advisable when putting together your POA, but as you ponder who you want to give control of your money to, here are 9 guidelines to consider.

1. Don’t Let Anybody Pressure or Coerce You. Assigning a Power of Attorney is a big choice–this person could potentially be managing your finances, and even with the best of intentions some may not do it well. We are all for having your paperwork in order, but this should be a well-thought-through decision.

2. Select Someone Who Understands Your Goals and Objectives. Selecting a like-minded individual when it comes to finances–someone who approaches money and investments the same way you do–is a good rule of thumb. At the very least, make sure they are clear on your approach, and are willing to follow your lead. This job requires nothing less than 100% trust.

3. Be Specific About What Kind of Power You Are Granting. A POA can limit investment activity or give the agent total control. You can specify accounts and asset types that the POA covers,  exclude the authority to change beneficiaries, or put a time limit on the POA. To maintain integrity, try not to end a section or paragraph of your POA at the end of the page–that would make it easy for pages to be added.

4. Make It Durable. A durable POA stays in effect if you are incapacitated and cannot manage your own finances, whereas one that is not durable is revoked if you are found mentally incapacitated, and a court may appoint someone to act for you. Note that as soon as you sign a POA it is in effect. You can opt for a springing POA, which goes into effect at a certain age or if you are deemed mentally incapacitated.

5. Check Your State’s Requirements. POA laws vary by where you live and where you hold investment accounts. Most states will recognize a notarized document from another state, but check your state’s website to be clear.

6. Find Out if Your Financial Institution Requires Its Own Paper for Your POA. In our previous blog, “Is Your Durable Power of Attorney Good Enough for Your Bank,” we discussed the new trend of financial institutions requiring POAs to be written up on their own paper. Yours will likely work in the long run, but you may have to go to court to prove it.

7. Check in On Your Finances. In today’s landscape of fraudsters, auditing your finances regularly is advisable anyway. Once you have granted someone the power to access your finances, it becomes even moreso. You can request that your institution notify you if they receive a POA document that relates to your accounts. Financial institutions are generally on the lookout for bad actors, so you may want to sign extra copies of your POA for your agent, as most will want originals.

8. Know How to Change or Revoke Your POA. As long as you are mentally sound, you can revoke or change a POA for any reason. Make sure you inform your investment broker, attorney, and financial institutions as soon as you make this decision, though, because there is a notarized piece of paper already out there. States have different requirements on how to change or revoke a POA, so visit your state’s website.

9. Have a Backup Plan. Having an alternate or successor agent is advisable in the event your agent can’t act on your behalf. You can also assign a POA monitor who will be copied on statements and withdrawals.

Source: Financial Industry Regulatory Authority (FINRA)