Special Power of Attorney
Special powers of attorney for financial management carry the same caveat as general powers of attorney: placed into the wrong hands, they can become a license to steal. Like all financial powers of attorney, you must be certain that the person you appoint to act as your agent is absolutely trustworthy. Here are some examples of special powers of attorney and how they work.
A special power limits your agent’s authority and is generally used only in specific circumstances. For example, you may be in the process of purchasing a home but, nearly a year ago, you purchased a non-refundable European vacation and you won’t be available to sign all of the real estate documents. A special power of attorney can authorize your agent to act on your behalf and sign all necessary papers to complete the purchase.
Under this scenario, your agent’s authority is very limited.
Contrast this to a general power of attorney for financial matters. With this document, you are granting authority for someone else to handle all of your financial matters – opening and closing bank accounts, withdrawing money, purchasing or selling real property – essentially, your agent would have the ability to transact every type of financial business that you would. A very dangerous document if placed into the wrong hands.
Usually, a general power over finances should only be granted if it utilizes a “springing power”. This means that your agent has no authority to act unless two qualified medical doctors provide written declarations, under penalty of perjury, that you are incapacitated and unable to make sound financial decisions. Then, and only then, does the power “spring into being”, as it were, and allow your agent to act on your behalf.
A special power of attorney generally becomes effective immediately. It is granted to allow your agent the authority to handle one or more specific transactions and, again, is usually done out of convenience because you are unavailable to timely act.
Using a boilerplate form where you just fill-in the blanks to specify the exact authority you wish to grant can be a mistake. Sometimes the authority is too limited and could prevent your agent from being able to complete the particular financial transaction. For example, granting authority to “sign all documents required by my real estate broker” may not be acceptable to the lender or the escrow company. They may have different requirements and do not feel comfortable in recognizing your agent’s authority under the special powers you have stated.
An attorney can assist with the creation of a special power of attorney for financial matters and, in doing so, should contact all of the companies and agencies involved to ensure that their requirements are met. The exact language used in the document can then be tailored to meet all of these needs.
Special powers of attorney can be very useful in completing certain transactions but should be tailored to meet very narrow and specific situations. If properly drafted, they are a valuable financial tool.