Power of attorney is a legal designation granted to someone who has decision-making power over another’s estate. Usually, spouses have power of attorney over other spouses if they become incapacitated. There are two different types of power of attorney. One refers to a health care proxy. In this article, we will only be discussing the financial power of attorney, or an individual who has been given the power to make financial decisions on someone else’s behalf.
Financial power of attorney basics
A “principal” appoints an “agent” to make financial decisions on their behalf. The agent has a duty to make decisions that are in the best interests of the principal. Generally speaking, spouses take power of attorney if their spouse becomes incapacitated or can no longer make those decisions for themselves. However, financial POAs can be assigned in a number of situations.
If no POA is assigned by the principal, then a probate court may step in and assign a POA, usually a close family member.
What does an agent do?
The agent has a fiduciary duty to the principal. That means that they are obligated by law to act only in the principal’s best interests when acting in the role of POA. POAs also have terms. The agent must only act within the scope of the POA.
The principal will determine the scope of the agent’s authority unless the court vests the power in someone’s hands. Then the court will set forth the scope of the POA and define what obligations the agent has to the principal.
Limitations on power of attorney
Having POA is not exactly a fun job. You are essentially responsible for someone’s finances even when they cannot manage those finances themselves. No one would go out of their way to become a POA unless they were an investor managing the assets of a client.
For that reason, the scope of the POA agreement is generally limited. A POA, unless they are specifically granted the authority to do so, may not create or change an existing trust, give away the principal’s property, change or create rights of survivorship, change beneficiaries in a will, or let others act in place of their POA authority.
The bottom line
A power of attorney contract sets forth the rights and restrictions an agent has when acting at the behest of a principal. If you have been named POA of another’s estate, you may want to discuss the matter with an Ohio elder law attorney today. We can keep you abreast of all the latest laws, rules, and requirements for those vested with POA responsibilities and help you manage your loved one’s finances with the peace of mind of knowing that they are not breaking any laws.
Call Kryszak Law Firm, Co., LPA today to schedule an appointment and discuss issues related to power of attorney in more detail.