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Specific Financial Powers, Part 1

Using Nolo's Durable Power of Attorney for Finances, you can give your attorney-in-fact up to 16 specific financial powers. The powers may put an enormous amount of control over your finances into the hands of your attorney-in-fact, and it's important that you understand exactly what each power authorizes your attorney-in-fact to do. To that end, we walk you through each power, one at a time, asking whether you want to grant it or not.

If you grant all the powers, your attorney-in-fact will be able to handle your investments, real estate, banking, and other financial tasks. The attorney-in-fact can use your assets to pay your debts and expenses—including home maintenance, taxes, insurance premiums, wage claims, medical care, child support, alimony, and your personal allowance. The attorney-in-fact can sign deeds, make gifts, pay school expenses and endorse and deposit checks.

  1. Real Estate Transactions
  2. Personal Property Transactions
  3. Stock, Bond, Commodity and Option Transactions
  4. Banking and Other Financial Institution Transactions
  5. Business Operating Transactions
  6. Digital Assets and Accounts

(Read about powers 7-16 in Choosing Specific Financial Powers – Part 2 and The Power to Make Gifts.)

1. Real Estate Transactions

This power puts the attorney-in-fact in charge of any real estate you own. Your attorney-in-fact must, for example, use your assets to pay your mortgage and taxes and arrange for necessary repairs and maintenance to your home. Most important, this power allows the attorney-in-fact to sell, mortgage, partition or lease your real estate.

The attorney-in-fact may also take any other action connected to real estate. For example, your attorney-in-fact may:

  • buy or lease real estate for you
  • refinance your mortgage to get a better interest rate
  • pay off legal claims on your property
  • buy insurance for your property
  • build, remodel or remove structures on your property
  • grant easements over your property, and
  • bring or defend lawsuits over real estate.

Restricting the Sale of Your Home

Losing your home, especially if you've lived there many years, can be a disturbing prospect. Some people feel strongly that the attorney-in-fact should not sell their home—no matter what happens. If you want to grant the real estate power but forbid your attorney-in-fact from selling or mortgaging your home, we allow you to include that restriction.

But think carefully before you tie the hands of your attorney-in-fact in this way. You certainly don't want to lose your home—but a financial emergency may make it necessary. Ideally, you'll trust the person you name as your attorney-in-fact to use discretion to make the decision based on your best interests—particularly if you have named your spouse or other co-owner of your home to serve as your attorney-in-fact.

2. Personal Property Transactions

Personal property here means physical items of property—for example, cars, furniture, jewelry, computers, and stereo equipment. It does not include real estate or intangible kinds of property such as stocks or bank notes.

If you grant this power, your attorney-in-fact can buy, sell, rent or exchange personal property on your behalf. Your attorney-in-fact can also insure, use, move, store, repair or pawn your personal things. Again, all actions must be taken in your best interest.

EXAMPLE: Paul names his wife, Gloria, as his attorney-in-fact for financial matters. When he later goes into a nursing home, his old car, which he can no longer use, becomes an expense Gloria cannot afford. As Paul's attorney-in-fact, she has legal authority to sell the car.

3 Stock, Bond, Commodity and Option Transactions

This power gives your attorney-in-fact the power to manage your securities—including stocks, bonds, mutual funds, certificates of deposit, commodities and call and put options. If you grant this power, your attorney-in-fact can buy or sell securities on your behalf, accept or transfer certificates or other evidence of ownership and exercise voting rights.

CAUTION: Brokers may use different forms. Many brokerage houses have their own durable power of attorney forms. If yours does, it's a good idea to use it in addition to Nolo's Durable Power of Attorney for Finances. Using your broker's form will make things easier for your attorney-in-fact, because your broker will have no need to investigate your power of attorney and quibble over its terms. The broker will already have its form on file and will understand exactly what your attorney-in-fact is authorized to do. If you do use a broker's form in conjunction with Nolo's Durable Power of Attorney for Finances, be consistent; name the same attorney-in-fact for both documents.

4. Banking and Other Financial Institution Transactions

One of the most common reasons for making a durable power of attorney is to arrange for someone to handle banking transactions. If you give your attorney-in-fact authority to handle your bank accounts, your bills can be paid, and pension or other checks can be deposited in your accounts even if you can no longer take care of these matters yourself.

EXAMPLE: Virginia, who is in her 70s, is admitted to the hospital for emergency surgery. She's too weak to even think about paying her bills or depositing her Social Security check—and, anyway, she can't get to the bank. Fortunately, she earlier created a durable power of attorney for finances, naming her niece Marianne as her attorney-in-fact. Marianne can deposit Virginia's check and sign checks to pay the bills that come while Virginia is in the hospital.

With this power, your attorney-in-fact may open and close accounts with banks, savings, and loans, credit unions or other financial institu­tions on your behalf. The attorney-in-fact may write checks on these accounts, endorse checks you receive and receive account statements. The attorney-in-fact also has access to your safe deposit box, to withdraw or add to its contents.

In most states, the attorney-in-fact may also borrow money on your behalf and pledge your assets as security for the loan.

CAUTION: Financial institutions may use different forms. Many banks and other financial institutions have their own durable power of attorney forms. Even though using this form to grant the banking power will give your attorney-in-fact authority to act on your behalf at any financial institution, it's a good idea to use the financial institution's form also. Using the form that your financial institution is most familiar with will make it easier for your attorney-in-fact to get things done.

5. Business Operating Transactions

This power gives your attorney-in-fact authority to act for you in operating a business that you own yourself or that you run as a partnership, limited liability company or corporation. Subject to the terms of a partnership agreement, an operating agreement or corporate rules set out in the bylaws and shareholders' agreements, this power allows your attorney-in-fact to:

  • sell or liquidate the business
  • merge with another company
  • prepare, sign and file reports, information and returns with government agencies
  • pay business taxes
  • enforce the terms of any partnership agreement in court, and
  • exercise any power or option you have under a partnership agreement.

If your business is a sole proprietorship, the attorney-in-fact may also:

  • hire and fire employees
  • move the business
  • change the nature of the business or its methods of operation, including selling, marketing, accounting, and advertising
  • change the name of the business
  • change the form of the business's organization—that is, enter into a partnership agreement or incorporate the business
  • continue or renegotiate the business's contracts
  • enter contracts with lawyers, accountants or others, and
  • collect and spend money on behalf of the business.

If you're a sole proprietor, a durable power of attorney is a very useful way to let someone else run the business if you become unable to do so. No court proceedings are required for the attorney-in-fact to take over if you become incapacitated, so there should be no disruption of your business. If you grant this power, be sure to work out a business plan with the person you plan to appoint as your attorney-in-fact; explain what you want for your business and how you expect it to be managed.

CAUTION: Check your existing agreements. If you operate your business with other people as a partnership, limited liability company or closely held corporation, your business agreement should cover what happens if a partner or shareholder becomes incapacitated. Typically, the other business owners can operate the business during the incapacitated person's absence or even buy out his or her share. A durable power of attorney will not affect these rules you already have in place.

EXAMPLE: Mike wants his wife, Nancy, to be his attorney-in-fact to manage his finances if he becomes incapacitated. Mike, a housepainter, runs the M-J Painting Co. with his equal partner, Jack. Their agreement provides that if one partner becomes incapacitated, the other has exclusive authority to operate the business.

If Jack and Nancy have conflicts over money, however, there could be some problems. Mike, Jack, and Nancy should think through the arrangement carefully and may want to consult a lawyer. Whatever they decide on should be spelled out in detail in the partnership agreement. They may also want to create a customized durable power of attorney, with the lawyer's help, that sets out the details of the business arrangements.

6. Digital Assets and Accounts

This power gives your attorney-in-fact the ability to manage your digital assets, including email, blogs, online financial accounts, social media profiles, and any other electronic accounts or files.

If you include this power, your document will provide very broad rights for your attorney-in-fact, including the right to access, control, distribute, duplicate, deactivate or delete your accounts or records. Of course, like all authority you grant in your power of attorney, your attorney-in-fact may do these things only in your best interest and according to your instructions.

Ideally, this power will allow your attorney-in-fact to handle tasks such as paying bills using your online bank account, posting a note to your blog or renewing your auto insurance online. But stating this power in your document may not be enough. Your attorney-in-fact's ability to get into your accounts will depend on:

  • whether he or she has your username and password information
  • whether you have made any prior arrangements with the company about your attorney-in-fact's ability to access your account
  • possibly, the company's terms of service agreement
  • why your attorney-in-fact needs access, and
  • your state's law.

The easiest way to make sure that your attorney-in-fact will be able to access your accounts is to provide your username and password information. That way, your attorney-in-fact will immediately have the same control over the accounts that you would have. You can do this in a separate letter to your attorney-in-fact. Be sure to store this letter in a safe place and tell your attorney-in-fact where to find it.

If your attorney-in-fact doesn't have your username and password information, getting access to your digital assets will probably be difficult. Most states now give attorneys-in-fact the legal power to access digital assets when the power of attorney provides for such power. However, even where access is theoretically permitted by law, in the practical matter of actually getting access or information from the businesses that control the accounts, attorneys-in-fact are likely to face bureaucracy (at best) and obstinance (at worst).

If you want your attorney-in-fact to have maximum access to your digital assets, include this power and also leave instructions about how to access the accounts in a separate document. You may also want to provide some guidance on what you'd like your attorney-in-fact to do with your digital property. For example, you could ask your attorney-in-fact to respond to certain emails, update the amount of your automatic online payments to reflect the annual increase of your insurance premium or close your Facebook account. For more help thinking about how your attorney-in-fact could help with your digital assets, go to www.nolo.com/legal-encyclopedia/digital-assets.

If, on the other hand, you don't want your attorney-in-fact to have access to your online accounts and other digital assets, skip this power. But also keep in mind that you may need to take further steps to protect your privacy. Depending on state law, your attorney-in-fact may be able to access some of your digital assets even if you leave this power out of your document. To restrict your attorney-in-fact's authority to access your online accounts, see a lawyer for help.

(Read about powers 7-16, in Choosing Specific Financial Powers – Part 2 and The Power to Make Gifts.)

  1. Insurance and Annuity Transactions
  2. Estate, Trust, and Other Beneficiary Transactions
  3. Transferring Property to Your Living Trust
  4. Legal Actions
  5. Personal and Family Care
  6. Pet Care
  7. Government Benefits
  8. Retirement Plan Transactions
  9. Tax Matters
  10. Making Gifts