General Power of Attorney
General power of attorney references a legal document that allows one person to engage in a myriad of personal and business financial transactions. It provides broad sweeping powers that essentially allow the agent to conduct nearly any type of activity for an extended period of time.
The person writing the general power of attorney is known as the Principal. They can only authorize their agent to engage in transactions related to property they personally own or to make decisions on their behalf.
Agents are referred to as the attorney-in-fact. This doesn't mean the person has to be a lawyer. Instead, it refers to the authorization they have to engage in transactions that have legal ramifications. For example, agents could apply for financing to buy a house in the Principal's name.
For obvious reasons, it's vital to take care when choosing the attorney-in-fact. This person needs to be someone that can be trusted and relied upon to engage in ethical behavior. While designated agents are not required to assume duties, once they do they are required by law to act as fiduciary over the Principal's personal finances.
Agents can be spouses, relatives, lawyers, financial advisors, or friends. They must be of legal age and of sound mind. Assuming duties as attorney-in-fact can be an enormous responsibility, so take time to discuss the responsibilities with the chosen agent.
Establishing general power of attorney is a good choice for nearly everyone. If something were to happen that prevents a person from being able to speak for their self, agents can step in and manage finances or take over business operations in the Principal's absence.
Some of the transactions that agents can perform include: pay bills and loan payments; deposit, withdraw, or transfer funds in checking and savings accounts; access safety deposit box contents; buy, sell, or trade financial products, real estate investments, or business equipment and assets.
When the attorney-in-fact is charged with caring for real estate investments they can engage in the same acts as the Principal. For example, if tenants have fallen behind with rent payments, agents can engage in necessary steps to collect the money. This could be as simple as accepting a payment arrangement to appearing in court to file eviction notice.
A power of attorney form is necessary to grant agent privileges to manage the Principal's business. Agents might be completely responsible for all aspects of business operations including hiring or firing employees; paying vendors or extending credit terms to clients; buy, sell or trade business equipment; enter into contracts; or file business tax returns.
In instances where a person doesn't want to grant broad POA rights, they can use other power of attorney forms instead. For example, if a person wanted an agent to sell their car because they are out of state, they could use a special power of attorney. This type of POA limits the duties to specific tasks. Once completed, POA privileges are revoked.
Another example is to set up a medical power of attorney to assign an agent to make healthcare decisions on your behalf. Medical POA rights do not become effective until a declaration of incompetence has been filed by the Principal's physician.
Medical power of attorney is an important document to execute because it lets you put into writing any type of life-saving treatment or procedure you do not want to have if your quality of life is severely affected.
We invite you to learn more about the different types of power of attorney documents and their uses in our personal finance library. While we don't offer legal advice, we do provide information regarding general power of attorney, limited POA, medical POA, springing POA and durable power of attorney so that you can make educated decisions.
Published on November 07, 2011 at 03:06 AM