Financial Powers of Attorney
A financial power of attorney relationship is created by a written document. You (the principal) appoints an agent to act on your behalf. This permits the agent to enter into agreements on your behalf for personal, financial, business, and real estate purposes. Because of this, you want your agent to be someone you trust. Powers of attorney are revocable by the principal. Powers may also be invalidated due to life-situations such as a divorce.
Drafting Powers of Attorney
In a financial power of attorney agreement, the powers an agent has can be as broad or as narrow as the principal wants. They can include managing assets such as real estate, personal property, stocks, and bank accounts. An agent may also act on behalf of a principal for business management, litigation, and trust agreements.
The powers given to a financial power of attorney can become effective immediately or can occur after a specific date or occurrence. In situations where the principal becomes incompetent or incapacitated, powers can remain indefinitely so long as specific language is in the document allowing this to occur. If a power of attorney remains effective in these situations, the agent is said to have a durable power of attorney.
Financial powers of attorney can be part of a comprehensive family wealth management plan. Specifically, a power of attorney aids in emergency situations. They will make decisions for the principal. Having a properly written power of attorney provides you and your family members peace of mind.
Ohio’s law concerning powers of attorney changed less than five years ago. With these changes came new issues to contemplate in creating your family wealth plan. Changes to Ohio’s law have clarified powers of attorney. Although, best practices dictate this so other states clearly understand your POA in an emergency.
Hot vs. Cold.
Ohio’s powers of attorney law distinguish “hot powers” from other standard powers for agents. Generally, a hot power is one that, when used, materially affects your assets or control by the POA. Because these powers can greatly affect you and your assets, the POA places it in a separate section.
Examples of hot powers can include the power to make gifts, change rights of beneficiaries, and change living trusts. A hot power may also allow an agent to name a sub-agent to delegate authority. You must put these powers in writing indicating how broad or narrow you want these powers to be.
Consider these POAs. . .
Hot powers are important topics to consider when evaluating your power of attorney document. Be sure to discuss the ramifications of issuing a hot power with a professional. A hot power, although helpful, cause problems if you do not have fully thought out family wealth plan.