A financial power of attorney is a legal document that allows you to appoint a trusted individual to manage your financial affairs on your behalf. This can be especially important in situations where you are unable to make decisions for yourself due to illness, injury or other circumstances. By granting someone financial power of attorney, you can ensure that your bills are paid, your investments are managed and your financial obligations are met, even if you are incapacitated.
For all of your financial needs, from building wealth to planning for retirement, consider talking to a financial advisor.
What Is a Financial Power of Attorney?
A financial power of attorney is a legal document that grants an individual (the agent or attorney-in-fact) the authority to make financial decisions and manage assets on behalf of another person (the principal). The primary purpose of a financial power of attorney is to ensure that the principal’s financial matters can be handled by a trusted individual in the event that the principal becomes incapacitated or is otherwise unable to manage their own finances.
The principal is responsible for selecting a trustworthy agent and clearly defining the scope of the agent’s authority in the financial power of attorney document. The agent, in turn, has a fiduciary duty to act in the principal’s best interests and manage their financial affairs responsibly.
Reasons for a Financial Power of Attorney
Establishing a financial power of attorney can help you minimize the risk of missed payments, defaulted loans, or other financial setbacks.
An agent would be authorized to make financial decisions and take actions that include paying bills, managing investments, filing taxes and selling or purchasing property on behalf of the principal.
Additionally, it can help eliminate the need for court intervention and potential legal complications that may arise if you become incapacitated.
Other Uses for a Power of Attorney in Washington
While often associated with financial affairs, a power of attorney can also be used for healthcare decisions and other specific purposes in Washington state. One important type of power of attorney is the medical power of attorney, also known as a healthcare directive or healthcare proxy. This document allows the principal to designate an agent to make medical decisions on their behalf if they are unable to do so themselves due to illness, injury or mental incapacity.
Another useful application of power of attorney is the limited power of attorney, which grants an agent the authority to act on behalf of the principal for a specific purpose or transaction. Unlike a general power of attorney, which gives the agent broad authority to manage the principal’s affairs, a limited power of attorney is restricted to a specific scope and duration. Common uses include authorizing an agent to sign legal documents, manage a real estate transaction or file taxes on behalf of the principal.
When a Power of Attorney Ends in Washington
Failing to properly terminate a POA can lead to serious consequences, such as the agent continuing to make decisions on behalf of the principal without their consent or knowledge. This could result in financial losses, legal disputes or even criminal charges in cases of abuse or fraud. Common reasons for POA termination in Washington include:
- Revocation by the principal: If the principal decides they no longer want the agent to act on their behalf, they can revoke the POA by notifying the agent in writing and destroying all copies of the document.
- Death of the principal: In the event of the principal’s death, the POA automatically terminates, and the agent no longer has any authority to act on their behalf.
- Incapacitation of the agent: If the agent becomes incapacitated or unable to fulfill their duties, the POA may be terminated, and a new agent may need to be appointed.
According to the Revised Code of Washington (RCW) 11.125.110, a principal may revoke a power of attorney by a signed writing or by personally informing the agent orally or in writing. If the principal becomes incapacitated, the POA may be terminated by a court order or by the activation of a springing POA that names a successor agent.
Bottom Line
A power of attorney is allows the principal to delegate decision-making authority to someone they trust, which can help ensure that their interests are protected and their wishes are carried out even if they become unable to make decisions for themselves. Beyond financial matters, a power of attorney can also be used for healthcare decisions and other specific purposes, offering flexibility and protection in various situations.
Tips for Financial Planning
- A financial advisor can help you create a financial plan to build wealth and manage your estate for unexpected circumstances. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you’re looking to expand your financial capabilities, consider these financial planning resources.
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