Creating a financial power of attorney

On Behalf of | Dec 7, 2020 | Estate Planning

When people create a will or trust in their estate planning, they usually include a living will or durable power of attorney as part of the estate planning documents. But another important advanced directive that sometimes gets overlooked is a financial POA that will oversee the estate’s income, assets and business transactions.

The fact is, many Americans do not have important estate planning documents in place that will direct end-of-life decisions. Although half of people who are 65 and older have an up-to-date will, 55% die without any will or estate plan in place. And although 82% of people aged 72 and older have a medical POA, only 48% of older Americans have created a financial POA.

The purpose of a financial POA

Understanding what a financial POA is helps to explain what it will do. It is a legal document that authorizes one person to act on behalf of another in specific or all-encompassing financial matters.

The financial POA is set up by the maker of the document, called the principal, and delegates responsibilities to another person, who is called the agent. A financial POA allows the agent to manage financial matters of the estate, such as investments, selling property, paying bills and the signing of documents.

Types of powers of attorney

There are three types of POA’s that function under different circumstances:

  1. A limited POA is restricted to a specific act, for example allowing the agent to handle an out-of-state transaction locally, such as selling property.
  2. A general POA grants broad powers to the agent to act on the principal’s behalf, with a list of authorized acts the agent may perform.
  3. A durable POA is a POA that does not cease to function in the event of incapacitation of the principal. In Florida, there are exceptions to this type of POA that require specific wording to allow the POA to survive incapacity.

Setting up a financial POA in Florida

Under Florida law, a POA must be signed by the principal in front of two witnesses to the signature, as well as the acknowledgement of the signature by a notary public. The use of the POA is subject to the Florida Power of Attorney Act, which also specifies compliance with real estate transaction requirements.

When considering your estate plan, it is important to get informed counsel on the legal and financial aspects of estate planning. Along with healthcare directives, be careful to also secure your estate’s financial health as well.