General Power of Attorney
A general power of attorney is a document that establishes legal authority for one person to make decisions on behalf of another person. These rights are broad and grant permission to engage in all sorts of personal and business transactions.
In order for a general power of attorney to be effective, it must be comprised of a Principal and Agent (also referred to as attorney-in-fact); witnessed by two individuals that are unrelated to the Principal; and notarized by a notary public.
Since the power of attorney grants sweeping rights, it is crucial to select an agent that is responsible and trustworthy. By law, agents have to be of legal age and not have any hindrances that would prevent them for exercising their POA privileges.
Additionally, most general POA forms allow the Principal to designate a secondary agent that can assume duties if the primary agent is unable to serve. This is a good preventative measure that can ensure actions can continue without interruption.
A general power of attorney authorizes agents to engage in activities related to personal and business finance. Agents are allowed to open, close, and maintain all types of bank accounts including checking, savings, CDs, and brokerage accounts. Agents can make deposits and withdrawals; buy, sell or transfer business notes; and access contents stored in a safety deposit box.
Agents are also allowed to buy, sell, or trade assets owned by the Principal. This could include real estate investments, business equipment, automobiles, and financial products. When investment property is owned, agents are allowed to collect rent, evict tenants, enter into new leasing agreements, and orchestrate 1031 exchanges or enter into seller-financing options such as owner will carry.
General power of attorney also grants rights that allow agents to buy or maintain insurance policies including life insurance. Not only are agents allowed to manage life insurance policies for the Principal, they can also purchase policies for other appropriate persons, such as the Principal's spouse or children.
If the Principal owns a business they can establish a general power of attorney to authorize their agent to manage the company. In this scenario, agents can assume daily operations tasks, as well as enter into contracts, sell, buy or trade business assets, file tax returns, and employ professionals such as accountants and attorneys.
General power of attorney also lets agents prepare, sign, and file documents for government entities including the IRS, Social Security, Medicare, and Veterans Administration.
If agents are required to enter into negotiations with government entities they are allowed to hire lawyers, certified public accountants, or other professionals that are authorized to enter into negotiations.
Last, but not least, general power of attorney lets agents make charitable donations and transfer assets to family members. This includes transferring assets to a Trustee of a revocable trust that was established by the Principal.
As you can see, general power of attorney essentially lets the agent engage in all activities related to your life. Prior to granting rights to an agent, it is wise to discuss your wishes with the agent to ensure they are capable and willing to take on the role.
People that do not want to authorize a person to handle every facet of personal or business tasks, may find they only need a limited power of attorney. This type of POA authorizes the agent to engage in specific tasks and does not grant sweeping powers.
Additionally, individuals may need to establish a medical power of attorney that authorizes the agent to make health care decisions on their behalf. It's usually best to have the same agent oversee financial and healthcare decisions, but if this isn't possible try to appoint agents that is capable of working well together.
We invite you to learn more uses for general power of attorney, along with the other types of POA forms in our personal finance article library. While we do not offer legal advice, we do provide information and resources to help visitors make informed choices about important life events.