Special powers of attorney for financial management carry the same caveat as general powers of attorney: placed in the wrong hands, they can become a license to steal. As with all financial powers of attorney, you must be sure that the person you appoint to act as your agent is absolutely trustworthy. Here are some examples of special powers and how they work.
A special power of attorney limits the authority of your agent and is generally used only in specific circumstances. For example, you may be in the process of buying a house but, almost a year ago, you bought a non-refundable European vacation and you won’t be able to sign all the real estate documents. A special power of attorney can authorize your agent to act on her behalf and sign all the documents necessary to complete the purchase.
Under this scenario, your agent’s authority is very limited.
Compare this to a general power of attorney for financial matters. With this document, he grants authority for another person to handle all of his financial affairs: opening and closing bank accounts, withdrawing money, buying or selling real estate; essentially, his agent would have the ability to transact all kinds of financial businesses that you would. A very dangerous document if it falls into the wrong hands.
Generally, a general power of attorney over finances should only be granted if you use a “spring power”. This means your agent has no authority to act unless two qualified physicians provide written statements, under penalty of perjury, that you are incapacitated and unable to make sound financial decisions. Then, and only then, does the power “surge,” so to speak, and allows your agent to act on your behalf.
A special power of attorney usually takes effect immediately. It is given to allow your agent the authority to handle one or more specific transactions, and again, it is usually done for convenience because you are not available to act on time.
Using a boilerplate form where you simply fill in the blanks to specify the exact authority you want to grant can be a mistake. Sometimes the authority is too limited and could prevent your agent from completing the particular financial transaction. For example, granting authority to “sign all documents required by my real estate broker” may not be acceptable to the lender or escrow company. They may have different requirements and may not feel comfortable recognizing your agent’s authority under the special powers you have declared.
A lawyer can help with the creation of a special power of attorney for financial matters, and when doing so, you should contact all companies and agencies involved to ensure their requirements are met. The exact language used in the document can be tailored to meet all of these needs.
Special powers can be very helpful in completing certain transactions, but they must be tailored to meet very specific and specific situations. If written correctly, they are a valuable financial tool.