The Definition of a California Financial Power of Attorney (“POA”)
A California Financial Power of Attorney (“POA”) is a document that gives a third party (your “Agent”) the legal authority to make certain financial decisions on your (the “Principal’s”) behalf.
What should be included in a California Financial Power of Attorney?
Your POA should clearly state whether it is:
1. Immediate or Springing California POA:
Immediate vs. Springing: Immediate POAs authorize your Agent to make financial decisions on your behalf immediately after you sign and notarize the POA; whereas Springing POAs authorize your agent to make these decisions on your behalf only after you have been deemed by a doctor (or in some cases two (2) doctors) to lack sufficient capacity to manage your own finances (i.e. they “spring into effect on this medical determination).
2. Durable Power of Attorney or Non Durable California Power of Attorney
Durable vs. Non Durable: Durable POAs authorize your Agent to make financial decisions on your behalf during the period of your incapacity; whereas Non-durable POAs expire if/when you are determined to lack capacity. Non-durable POAs are often used to achieve only a specific purpose (e.g. to sign a specific document or take a specific action on your behalf if you are not available / present to sign the document yourself).
3. Limited Power of Attorney or General Power of Attorney
Limited or General: Limited POAs grant your Agent only limited authority (e.g. to sign a specific document or take a specific action on your behalf if you are not available / present to sign the document yourself); whereas General POAs can be as broad as you wish.
What powers can be authorized under a California Financial Power of Attorney?
The legal authority your Agent has depends first and foremost on how the POA is drafted and what terms are set forth therein.
Powers granted under POAs include, but are not limited it:
- Real Property transactions (e.g. sell, purchase, lease);
- Tangible personal property transactions (e.g. sell, purchase, lease);
- Stock and bond transactions (e.g. sell, purchase);
- Commodity and option transactions;
- Banking and other financial institution transactions including access to safe deposit boxes and authority to withdrawal or add to the contents;
- Business operating transactions (e.g. operate a business on your behalf);
- Insurance and annuity transactions;
- Estate, trust, and other beneficiary transactions (e.g. transfer property to / from a trust, name beneficiaries);
- Claims and litigation (e.g. file / defend a lawsuit on your behalf);
- Personal and family maintenance (e.g. support family members);
- Benefits from social security, medicare, medicaid, or other governmental programs, or civil or military service (e.g. access to / apply for such benefits);
- Retirement plan transactions (e.g. access to / withdraw from retirement accounts; and
- Tax matters (e.g. sign tax returns, settle tax disputes).
What are the legal requirements for a valid California financial power of attorney?
The specific laws that govern the legal requirements for financial POAs are located in California Probate Code, starting at Section 4000. Generally, the requirements for a California Financial Power of Attorney are that:
- The Principal (person who is making the POA) must have legal capacity (meaning of at least 18 years of age and of sound mind); and
- Executed either 1) in front of a notary public or 2) before two witnesses. If the POA authorizes the Agent to have power over real estate matters, a notary is required.
Who should have a California Financial Power of Attorney in Place?
- People with Children;
- People who own a home;
- Single individuals
- Married couples;
- Anyone who owns assets or has bills to be paid;
- Most people over the age of 18;
In short, most individuals benefit from having a Springing, Durable POA in place. This is primarily because incapacity could strike any of us at any time. Without a valid POA in place there may not be someone available to manage your finances (e.g. pay your mortgage, rent, utilities, health care bills; sign tax returns; file / defend lawsuits; etc.).
In that event, a costly and time-consuming process through probate court is required to appoint a conservator to take actions on your behalf. Others yet may need a Limited, Durable POA if certain transactions are anticipated and the parties know the Principal will not be available to sign documents.
A California Financial Power of Attorney is just one piece to a comprehensive estate plan. When done correctly it will help to carry out your wishes with as little court involvement and unnecessary expense as possible.
Why hire an estate planning attorney to draft your California Financial Power of Attorney?
In today’s world, it’s not difficult to find POA forms online. A simple online search for “California Financial Power of Attorney” will result in numerous forms from which to choose. You will find “Statutory Form Power of Attorney” – a one-size-fits all POA approved by the California state legislature.
For some, such forms are better than nothing. For others, such forms create unanticipated problems and create more harm than good. Especially because the form is not entirely without ambiguity and uses terms that may not be understood by all.
Internet POA forms
You should not take POA forms lightly considering their far-reaching impact. For example, would you grant someone authority to access your bank account, even if you are fully competent and manage your own finances?
For most, the answer would be “no”. However, a poorly drafted and signed POA may grant the authority to allow this. Further, the “Principal” is bound by the Agent’s actions. This includes foolish and/or negligent actions. For example, if your Agent signs a loan to purchase an asset (on your behalf), you will be bound to the debt regardless of whether it made sense for your Agent to do so. For these reasons, and many more, you should discuss your POA with an experienced estate planning attorney before printing and signing a form you found online.
Do I need to file a California Financial Power of Attorney?
Most POAs are not filed with any government agency. However, you should talk to your attorney about possible exceptions. Keep the original POA in a safe place. It should be accessible not only by you, but by someone you TRUST. Without the original available, your Agent may not be able to exercise his/her authority to act on your behalf when the need arises.
One exception to this rule relates to real estate transactions, when it may be necessary to record the POA with the County Recorder’s Office. In addition, in certain cases, it may be advisable to record the POA with the County – doing so could prove beneficial in the event the original is lost and your Agent needs to rely on a certified copy from the Recorder’s Office.
Questions About California Financial Power of Attorney?
If you or a loved one has any questions about putting in place a valid California Financial Power of Attorney, we are here to help. At Rassman Law our experienced Estate Planning Attorney T. Owen Rassman has set up hundreds of POA’s. Initial Consults are always free so feel free to contact us online or give us a call today! (760) 933-8254