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How Does Power of Attorney Work?

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For many families with elderly people or engaged in estate planning, power of attorney is essential, especially if the elderly person’s mental abilities are compromised. Having someone who can take care of legal and financial matters can make this part of life far easier. However, power of attorney is a sweeping grant of authority.
November 18, 2021

Depending on how you structure a power of attorney, an agent can – in some instances – transfer money and property to themselves. However, it’s uncommon and only allowed in specific circumstances.

Yahoo Finance’s recent article entitled "Can a Power of Attorney Transfer Money to Themselves?" explains that a power of attorney is when you assign someone (known as an agent or attorney-in-fact) the authority to make legally binding decisions on your behalf. Most of these documents have a limited grant of authority.

There are generally two types of Powers of Attorney. A “durable” Power takes effect the moment the document is executed, and continues even if the principal subsequently becomes disabled or incompetent due to sickness, accident or age. It is critical that the document include language that “This power of attorney will remain effective despite the subsequent disability of the principal. The grant of authority terminates at the time of the principal’s death, but can be revoked by the principal at any time during capacity. Since the grant of authority is effective during your capacity, it is important to select an agent who is trustworthy. This often is a spouse, a child, or a longtime friend. It is wise to appoint alternate agents who will act if the first named agent declines to serve.

The second type is known as a “springing” Power. This document becomes effective only in the event the principal becomes disabled. There are many problems attached to this type of power, i.e. when has the power “sprung”, proving with doctors help that the principal has in fact become incapacitated? To avoid this issue, it may be better to execute a durable Power.

A durable power of attorney allows an agent to make just about any decisions on your behalf while the power of attorney assignment remains valid.  An agent can transfer assets to themselves, if they have specific written consent from the grantor, the creator of the document). 

If you are considering appointing someone as your agent under a durable power of attorney, consult with us so we can provide limitations in the document.

Reference: Yahoo Finance (Sep. 21, 2021) "Can a Power of Attorney Transfer Money to Themselves?"

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1767 Morris Ave., Suite 314
Union, NJ 07083

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By Appointment Only:

73 Mt. View Blvd., Wayne, NJ 07470
(973)709-0909

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Hackensack Office

1 University Drive, Suite 609
Hackensack, NJ 07601

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