A Financial Power of Attorney is a legal document where a Principal (the creator of the document) designates an Agent to act on their behalf if they’re in a declined physical or mental state (incapacitated). Generally, a financial power of attroney provides “springing” authortiy to act on the Principal’s behalf. This means that the authorty given to the agent is only effective if the Principal is unable to act for themselves to due to physical or mental incapcity. If a person becomes incapcitated without a valid Finanical Power of Attorney, a court would generally have to intervene to designate someone to act on their behalf. This court process is time consuming, expensive, and a headache to navigate.
A Financial Power of Attorney creates a fiduciary duty for the named agent. This means that although the agent is in a position of power and has authority to withdraw funds from bank accounts, the agent must be able to show that the authority was exclusively used to benefit and safeguard the principal. If an agent withdraws funds from an account and uses those funds for a personal benefit, we’d call this a breach of fiduciary duty which carries both civil and criminal penalties.
A “Durable” Financial Power of Attorney means that the authority granted in the document persists even if the creator of the document becomes incapcitated. This is an important feature of creating a financial power of attorney. However, if the Principal is no longer living, the A Financial Power of Attorney immediately becomes void (at that point the Will would designate someone to act on their behalf).