You may have signed a financial power of attorney (POA) that allows one or more people to act on your behalf if and when you become unable to act for yourself. However, a financial POA is not valid in certain situations. Knowing when your POA will not be recognized is an often-overlooked aspect of estate planning.
What Is a Financial Power of Attorney? When you sign a financial POA, you grant the person you designate, known as an “agent” or “attorney-in-fact,” the legal authority to manage your financial matters, including banking transactions, real estate transactions, investments, gift-giving, and paying bills.
Some Situations Can Require Additional Documentation
Financial POAs can be broad, but they are not recognized in all situations. If you want to authorize your agent to work with the Internal Revenue Service (IRS), the Social Security Administration (SSA), the Department of Veterans Affairs (VA), and some financial institutions, you may have to complete additional documentation.
Working with the IRS. The IRS has its own means of designating an agent. Before an agent can represent you in front of the IRS, you must complete Form 2848, Power of Attorney, and Declaration of Representative. Form 2848 authorizes an agent (typically an enrolled agent, an accountant, or an attorney) to represent you in IRS audits and negotiations. But Form 2848 is also required if you just want an agent to handle basic tax matters such as filing your tax forms or paying your taxes. According to the Form 2848 instructions, the IRS might accept a POA that meets the requirements for being a substitute and is submitted to the IRS along with Form 2848.
Working with the SSA. The SSA does not recognize financial POAs. To designate someone to manage your Social Security benefits (including SSI payments), you must appoint a “representative payee.” You can appoint a representative payee in advance. If you do not appoint a representative payee and the need for one arises, the SSA may appoint one for you.
Working with the VA. Veterans who are not physically present or who want help with their claim may authorize another person to represent them when pursuing a claim for compensation or special monthly pension benefits. The veteran does not have to be incapacitated. The VA allows only certain types of representatives, and they must apply for accreditation using different forms.
Working with Financial Institutions. Banks and other financial institutions sometimes refuse to honor financial POAs. In some cases, they may simply be exercising caution to protect themselves from authorizing an illegal transaction. In other cases, the institution may have its own standard POA form for accounts under its management. For the sake of expediency, check with your financial institutions and find out whether they have their own power of attorney forms. If they do, bring the form to our office to be reviewed and executed alongside your financial POA. We will also need to ensure that the two documents do not conflict.
We Are Here to Help! Though a financial POA is crucial for ensuring that your financial affairs will be handled according to your wishes, it may not cover all possible needs. By planning proactively, we can help ensure that you are properly protected regardless of the situation. Call us today to review your current estate planning documents or put your own personalized plan in place.