A power of attorney (POA) is a legal document that grants a person (known as the agent or attorney-in-fact) the right to make financial decisions on behalf of another person (the principal). Powers of attorney are essential documents that can be tailored for just specific powers, like selling real property, or can provide for general powers that give the agent broad financial powers. Many states use a power of attorney for financial and healthcare decision-making. Here in Florida, the term power of attorney refers to financial decision-making. This article will cover only the financial power of attorney.
The person named as the financial power of attorney has a fiduciary duty to make sure that all financial matters are carried out correctly. However, it’s essential to name someone you fully trust as your financial power of attorney since the power of attorney is such an important document.
In Florida, a power of attorney must be a natural person 18 years or older or a financial institution with trust powers. Often, people will name family members, close friends, or professionals that they trust to serve as their power of attorney. We highly recommend naming trusted family members or friends to serve before professionals or institutions.
Example: George is married to Delilah, and Delilah becomes incapacitated after a car accident. George thankfully named Delilah as his power of attorney to handle his financial affairs. Delilah could access all of George’s bank accounts and retirement accounts to pay bills. She could also use the power of attorney to protect George’s assets from the nursing home.
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Who Should Have a Power of Attorney (POA) Form?
Everyone older than the age of 18 should have a Power of Attorney. Once someone reaches the age of 18, if they become incapacitated and they do not have a power of attorney in place, then the only way their loved ones can make financial decisions for them is to go through the courts and obtain a guardianship. The guardianship process is often costly and stressful.
Powers of attorney are typically done during estate planning. They are often done along with Living Wills, Health Care Surrogates, and Last Wills and Testaments. However, it’s common for someone to execute a power of attorney without executing the other estate planning documents.
A lot of married couples mistakenly believe that if the other spouse becomes incapacitated, then the other spouse will automatically be able to make financial decisions for the other since they are married. They then quickly realize they have very little power to do things like pull money out of the incapacitated spouse’s retirement account, sell jointly owned property, and contract on behalf of the incapacitated spouse.
Example: Jim and Susie have been married for fifty years and live in Florida. They mistakenly believed that if one of them became incapacitated, the other would immediately be able to make financial and healthcare decisions for the other since they had been married for so long. Jim became incapacitated after a bad car accident, and Susie needed to pull money from Jim’s 401(k) to pay bills. Jim never executed a power of attorney.
Result: since Jim never executed a power of attorney, Susie cannot pull money from Jim’s 401(k) to pay bills and will need to file a guardianship or conservatorship with the courts to be appointed as the guardian/conservator. The guardianship will cost many thousands of dollars and subject Susie to a lot of added stress.
What Powers Can You Grant to Your Agent/Attorney-in-Fact?
When you give someone the ability to make financial decisions for you through a power of attorney, there are many different powers that you can grant depending on your specific needs and how much you trust the agent/attorney-in-fact. Most powers of attorneys that we draft here in Florida contain a lot of different powers so that your attorney-in-fact can step into your shoes if you become incapacitated and do whatever they need to do financially. Such powers include:
- Managing bank accounts
- Paying bills
- Entering into contracts
- Investing money
- Buying or selling real estate (real estate transactions)
- Representing you in legal matters, including litigation, business negotiations, and signing legal documents
- Operating a current business, including signing contracts, hiring employees, and managing financial transactions
- Estate planning and gifting
- Obtain legal advice from law firms
- Preparing and filing taxes and representing you in any matters dealing with the IRS
- Medicaid planning to protect and preserve assets should you need long-term care
Example: Lisa is incapacitated and needs to go into skilled nursing. She executed a well-drafted Florida power of attorney before she became incapacitated. Her daughter was able to immediately pay bills, manage her financial accounts, and engage a Medicaid planning attorney to protect and save all of Mom’s assets from the skilled nursing facility.
What are the Different Types of Power of Attorney Forms?
There are many different types of powers of attorney. The most common power of attorney in Florida is the durable power of attorney. Here are some different types of powers of attorney with explanations about how they work:
General Power of Attorney
A general power of attorney gives the attorney-in-fact board powers to handle many financial matters. It is often a few pages and references very broad powers. The general power of attorney is used in most states. However, the general power of attorney is not recommended here in Florida after the 2011 power of attorney law changes. The new Florida law requires that any power you want to give your agent must be listed explicitly in the power of attorney. Broad, generalized references to powers are not accepted here in Florida.
Special or Limited Power of Attorney
A special or limited power of attorney limits the attorney-in-fact’s authority to specific matters or situations. These are commonly used for selling real property or vehicles when someone cannot be local.
For example, John cannot come to Florida to transfer a vehicle through the DMV since he lives in Italy. He executes a limited power of attorney so that his sister, who lives in Florida, can transfer the vehicle on his behalf. The limited power of attorney will self-terminate on a specific date and time and no longer be active. Additionally, the limited power of attorney will only allow John’s sister to transfer the vehicle.
Durable Power of Attorney
The durable power of attorney is the most used power of attorney here in Florida. The durable power of attorney becomes effective as soon as it is executed and remains in effect even if the person who created the power of attorney becomes incapacitated. The durable power of attorney is often many pages longer than the general power of attorney since Florida’s laws require that every power you want to give your agent must be listed explicitly in the document.
Example: Jorge executed a Florida durable power of attorney since he is in his 80s and unable to manage his financial affairs fully. His daughter, the attorney-in-fact, can immediately step in even though Jorge is not incapacitated and manages his financial affairs. If Jorge later becomes incapacitated, then the durable power of attorney remains in effect so his daughter can make decisions during Jorge’s incapacity.
Note: The durable power of attorney becoming effective immediately upon signing is scary for many people since people usually do not want their power of attorney to act until they are incapacitated. The best way to prevent an agent from acting immediately upon signing is for the principal to keep the document in a safe location and to let the agent know where they can find the power of attorney if the agent becomes incapacitated.
Springing Power of Attorney
Springing powers of attorney become effective when someone becomes incapacitated. Florida no longer allows springing powers of attorney since the state laws changed in 2011. If you have a springing power of attorney from another state and are now a Florida resident, executing a new durable power of attorney is highly recommended.
Healthcare Power of Attorney
A healthcare power of attorney allows an agent to make decisions for health care. Florida calls these healthcare powers of attorney a healthcare surrogate or a healthcare directive. The healthcare power of attorney is only for healthcare decision-making, not financial decision-making. Some states combine financial and healthcare power of attorney into one document. We always think it is best practice to draft separate documents.
How Should I Choose an Attorney-in-Fact?
Choosing someone to serve as your power of attorney is a significant decision. We recommend choosing someone you fully trust who is financially responsible and can make sound financial decisions. Anyone over 18 can serve as the attorney-in-fact, including financial institutions and professionals (CPA, attorney, etc.).
We often recommend naming a family member or close friend before naming a financial institution or professional. Family members or close friends will often be better positioned to carry out your specific wishes. Financial institutions and professionals are not cheap and can drain someone’s life savings.
You can also name co-powers of attorney (co-agents), such as two children, to serve and make decisions together so that there is more of a check and balance. You also want to name a successor agent if the primary power of attorney cannot serve.
How Many Copies of a Power of Attorney Should I Sign?
We typically have clients sign one original power of attorney. However, you can execute as many original powers of attorney as possible. We then make copies of the power of attorney and scan the power of attorney so that the client and attorney-in-fact have digital copies of the power of attorney. Digital copies allow clients to take the power of attorney with them anywhere they go in the world.
How Much Does a Power of Attorney Cost?
Powers of attorney are typically inexpensive documents ranging in cost from ~$100 to $500, depending on the law firm. You can also use Legalzoom or another online alternative. However, these online websites often have poorly drafted powers of attorney documents. It is highly recommended to pay a professional so that you have a well-drafted power of attorney.
Can I Draft a Power of Attorney Myself?
You certainly can. We do not recommend it, as the power of attorney is arguably the most important document you can execute. Florida also has specific laws on what must be in a power of attorney. For example, the Florida power of attorney law lists several specific powers that must not only be listed in a power of attorney but must also be initialed next to allow the attorney-in-fact to perform those powers. We often see powers of attorney where this power is either not in the document or not initialed. Most often, this is due to someone either drafting a power of attorney themselves or executing a power of attorney they find online.
Example: Amanda is incapacitated and needs Medicaid for long-term skilled nursing. Without Medicaid, Amanda will be on the hook for $10,000/month in skilled nursing bills. Her family cannot afford to cover her $10,000/month skilled nursing bills.
Amanda is slightly over the Medicaid income limits and cannot qualify for Medicaid without Medicaid planning. Amanda executed a power of attorney before she became incapacitated, but the power of attorney did not authorize the agent to create trusts on Amanda’s behalf. The only way for Amanda to qualify for Medicaid is if her power of attorney creates a Qualified Income Trust (QIT) on her behalf.
Result: Amanda’s power of attorney will have to file for guardianship (costly and time-consuming) so that she can create a qualified income trust (QIT) so that Amanda can qualify for Medicaid.
What is the Best Power of Attorney to Have in Florida?
A Florida resident’s best power of attorney is the durable power of attorney. Florida does not allow a springing power of attorney (springing power of attorney is a power of attorney that only kicks in upon incapacity. A durable power of attorney is active as soon as it is signed and continues after incapacity.
A general power of attorney is not a good option in Florida since Florida law requires that any power you want to give your agent must be listed explicitly in the document. A special or limited power of attorney is only suitable in select circumstances (e.g., selling a home in Florida while you’re overseas); it is not a good option for allowing someone to make financial decisions for you if you become incapacitated.
Is it Worth Having a Power of Attorney Document?
Yes, we believe anyone over 18 in Florida should have a power of attorney. It’s an essential document. If you don’t have one and become incapacitated, then a loved one is going to have to go through court guardianship proceedings to make financial decisions for you.
What Are the Disadvantages of a Power of Attorney?
The most significant disadvantage of a power of attorney is that it gives the attorney-in-fact a considerable amount of financial decision-making power. There are many horror stories of unscrupulous attorneys abusing a power of attorney and taking advantage of someone unable to manage their financial affairs. That is why it is highly recommended to name someone you fully trust to make financial decisions.
Do I Need a Lawyer to Prepare a Power of Attorney?
No, you do not need a lawyer to prepare a power of attorney. However, hiring a lawyer to prepare a power of attorney is highly recommended since it is not a very expensive document to draft and is arguably the most essential estate planning document you will sign. Many free or inexpensive powers of attorney you find online or in a store will not meet Florida legal requirements.
Florida law requires that any power you want to give your agent must be in the document. That means that only a few pages of general powers of attorney are often an inferior choice if you’re a Florida resident. Many free or inexpensive powers of attorney you find online or in a store will only be a few pages and far too general to be effective.
Additionally, Florida law has several important powers that can only be given to an agent if the principal initials are next to each power. We often see powers of attorney that do not have these powers initialed next to them, which will prevent the attorney-in-fact from performing those powers here in Florida.
We often use powers of attorney when it comes to Medicaid planning to protect someone’s assets from the nursing home. The first document we ask to see is always a power of attorney to ensure that it allows us to do whatever is necessary to protect someone’s assets (e.g., establish a Qualified Income Trust or a Personal Services Contract).
Does a Power of Attorney Need to be Notarized, Witnessed, and Recorded?
Powers of attorney executed here in Florida must be signed by both the principal and two witnesses. The power of attorney must also be signed and acknowledged before a notary public. If the principal cannot sign due to a physical ailment, then the notary public may sign the principal’s name on the power of attorney.
It is not common for a power of attorney to be recorded. Sometimes, a power of attorney is recorded when an agent uses the power of attorney to sell the principal’s property or conduct business activities on behalf of the principal.
What Can a Power of Attorney Not Do?
Power of attorney here in Florida is solely for financial decision-making. A power of attorney is not for distributing assets after you die or for health care decision-making. A power of attorney ceases upon someone’s death, so it is not a testamentary like a Last Will and Testament or Trust that can transfer assets after death.
How Can I Revoke a Power of Attorney?
Revocation happens when the principal revokes a power of attorney in a subsequently executed power of attorney or another writing signed by the principal. It’s good practice to provide the revocation to all financial institutions and the agent upon revocation. It may also be a good idea to record the revocation in the county’s public records.