Today, we’re diving into an important aspect of estate planning: the financial power of attorney (POA) and its limitations. While a comprehensive estate plan prepares you for the unexpected, it’s essential to understand when your financial POA might not be enough.
What Is a Financial Power of Attorney?
A financial POA is a legal document that allows someone you trust – your “agent” or “attorney-in-fact” – to manage your financial affairs on your behalf if you’re unable to do so. This can include everything from handling banking transactions to managing real estate and investments. You can name multiple agents or alternates to ensure that someone is always ready to step in.
It’s crucial to have a conversation with your potential agent before naming them, ensuring they’re willing and able to take on this responsibility. In most states, a financial POA can be immediate, taking effect as soon as it’s signed, or springing, which means it only kicks in when you become incapacitated. Remember, the authority granted by a financial POA ends when you pass away.
Situations Requiring Additional Documentation
While financial POAs are powerful, they don’t cover every situation. For certain entities, like the IRS or Social Security Administration (SSA), you may need extra documentation.
Working with the IRS
If you want your agent to represent you with the IRS, you’ll need to fill out Form 2848, which authorizes them to handle tax matters on your behalf. This includes everything from filing your taxes to negotiating audits. Your agent must sign this form, and you’ll specify which tax years and matters they can manage. For further details, refer to IRS Publication 947.
Working with the SSA
The SSA does not recognize financial POAs. Instead, you need to appoint a “representative payee” to manage your Social Security benefits. This process can be initiated in advance, or the SSA will appoint someone if you haven’t designated anyone. Your representative payee will need to complete Form SSA-11 and usually meet in person at a local SSA office.
Working with the VA
If you’re a veteran needing help with your benefits, you can authorize someone to represent you. However, the VA doesn’t automatically accept a state-appointed POA. They have their own forms for representation – individual representatives use VA Form 21-22a, while accredited representatives use VA Form 21-22.
Working with Financial Institutions
Banks and financial institutions can sometimes hesitate to honor financial POAs. They may have their own requirements or standard forms. In certain states, institutions must respond to a POA within a specific timeframe. To avoid issues, check with your financial institution beforehand and bring their forms to our office for review.
We Are Here to Help
Navigating the ins and outs of a financial power of attorney is essential to ensuring your wishes are honored. By proactively planning, we can help you address all possible scenarios. If you have questions about your estate planning documents or need assistance creating a personalized plan, don’t hesitate to reach out.
At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.
To learn more about our one-of-a-kind systems and services, contact us or schedule a no-obligation 15-minute introductory phone call today.