Financial power of attorney allows someone to act as your stand-in for certain transactions. They can also access your accounts and make the same financial or business decisions that you could, under your authority.
Giving someone — called an agent, proxy, or attorney-in-fact —your financial power of attorney is sometimes necessary, such as in situations where you have been medically incapacitated or have to leave the country for an extended period. You may also need to give someone your power of attorney to finish certain transactions, such as when closing on a home purchase.
Other times, having someone with your financial power of attorney can simply be a convenience. Business owners, for example, may grant financial power of attorney to their accountants or executive assistants, especially if they tend to travel a lot.
Like any other legal decision, giving someone your financial power of attorney comes with both opportunities and risks. You can discuss your options with a lawyer who has experience with power of attorney authorization during a confidential, no-obligation case review.
Schedule your consultation to discuss financial power of attorney with New Mexico Financial & Family Law today when you call 505-503-1637 or contact us online.
Giving someone financial power of attorney — sometimes called a “general power of attorney” — can be risky, in some ways. Nevertheless, you can rest assured knowing that you are able to limit their power as much as you want.
In the document authorizing financial power of attorney, you can describe specific situations, transactions, and tasks that your agent is allowed to perform on your behalf. You can limit their power to only interactions involving a specific bank or account. You can say that their power only exists for the duration of one specific transaction, such as the purchase of property out-of-state.
Because they can be highly customized, it is critical to create your financial power of attorney document with the help of an experienced New Mexico lawyer. Your lawyer can help you decide on the exact language to include, based on the situations you anticipate. A lawyer can also help you include language that places checks on your agent’s power.
Creating a highly specific and tailored document is essential for your financial power of attorney to achieve the goals you set.
Consulting with a lawyer can teach you common strategies that others have used in your situation. Your lawyer will also inform you of effective ways to guard against possible risks related to financial power of attorney — such as by appointing an oversight role to monitor your agent.
New Mexico Financial & Family Law can also incorporate your power of attorney authorizations within a comprehensive estate plan. You can create a living will, powers of attorney documents, a last will and testament, trusts, or other estate planning tools all at once with your unique goals in mind.
Financial power of attorney can be authorized by anyone who is a legal adult, meaning they must be 18 years or older. An emancipated minor is also able to grant powers of attorney, in most situations.
To be able to give someone their financial power of attorney, the authorizing person would also have to have the mental capacity to make sound decisions. They may not need to take drastic steps to prove that they have the needed capacity if they are in good health with no history of mental illness, degenerative brain disease, drug abuse, or other conditions that could affect their mental clarity.
However, if there are any concerns about their capacity — or there’s a risk that someone could challenge their power of attorney authorization on the basis that they lacked capacity — then the authorizing individual may want to have their health and mental wellness certified by a recognized authority prior to executing a power of attorney document.
However, in New Mexico, everyone is presumed to have capacity. It can be very hard for some to prove, after the fact, sometimes years after the fact, that the principal was incapacitated at the time he signed the POA.
A qualifying individual can give someone financial power of attorney through the use of a relatively simple form.
The form declares the principal (the person giving their financial power of attorney to someone) and their designated attorney-in-fact. It also lays out the specific powers afforded to the attorney-in-fact, if there are any limitations.
The principal can select a starting date for the attorney-in-fact to assume their power, or they can describe a scenario where the financial power of attorney would activate. The latter arrangement is called a “springing” power of attorney.
Once the form is completed, the principal signs and dates it. This signing should be witnessed by a notary, who can notarize the document to attest to its authenticity.
Technically, no witnesses are required for a signed financial power of attorney to be effective. However, having the document notarized proves its authenticity, making it easier to defeat challenges to its legitimacy (see NM Stat § 45-5B-105).
When you give an agent financial power of attorney, they are authorized to act in your place in a wide range of situations.
Unless you specify otherwise, your agent is conferred with general powers under New Mexico state law (NM Stat § 45-5B-204 – 45-5B-217). The principal should consider these presumed powers and specifically deny any that they are uncomfortable with giving away.
Some of the abilities typically granted to an agent with financial power of attorney in New Mexico (see NM Stat § 45-5B-203) include the ability to:
Additionally, the agent has the authority to modify, use, sell, or purchase additional quantities of all possessions the principal owned, including:
However, your agent is not authorized to perform any of the following actions that can dramatically reduce your estate, unless they are expressly granted the ability to under your financial power of attorney document (see NM Stat § 45-5B-201):
Generally speaking, it would benefit you and reduce risks to your finances to specify all powers you do or do not want your agent to have. Review your options with a New Mexico power of attorney lawyer to ensure that the document you create accurately expresses your wishes while mitigating any major concerns.
Unless otherwise specified, your financial power of attorney becomes active immediately once the document is signed.
However, activation of the power of attorney can be delayed until a specified:
A financial power of attorney is indefinite unless specified otherwise.
If the principal chooses to, they can select a specific time or duration or set of circumstances for the appointment to end. Examples of termination conditions include setting a specific:
Note that, in New Mexico, all powers of attorney are assumed to be “durable,” unless they are explicitly described as non-durable (see NM Stat § 45-5B-104). A durable power of attorney can remain active even while the principal is incapacitated.
In addition, a principal can revoke their power of attorney authorization any time in which they have the capacity to do so. They can even revoke a power of attorney before it ever had the chance to activate.
Their revocation should make specific reference to the appointment and the powers they wish to revoke. The principal then signs and dates the revoking document, and they should have it notarized, as well.
Power of attorney automatically terminates upon the death of the principal, in all circumstances. Once the principal dies, their estate’s personal representative (i.e., their executor) assumes the fiduciary duties assigned to the former attorney-in-fact.
After you have executed your financial power of attorney document, you should store the original signed copy in a safe place. Keep a copy on hand, and provide a copy to:
In addition, it is often advisable to provide a copy to any bank, financial firm, or other institution that your agent will engage with on your behalf. These institutions may refuse to recognize your agent’s authority unless a copy is provided.
You may also need to file separate paperwork related to power of attorney for certain financial institutions, so be sure to ask everyone you use if they require additional authorization from you.
For transactions involving real estate in New Mexico, you will need to file a copy of your power of attorney document in the office of the county clerk for each county where there is a relevant transaction.
All attorneys-in-fact have a fiduciary duty, meaning they are obligated to act out of the interests of the party granting them power rather than their own self-interests (see NM Stat § 45-5B-114).
To make sure they uphold their fiduciary duty, you can monitor your agent while you have the capacity to do so. If you want additional oversight — or you want someone to monitor them while you are incapacitated — then you can appoint someone else to oversee their activities.
Your agent could be required to submit documentation of their actions to an overseeing individual or organization. The organization can also conduct due diligence to periodically verify that the agent’s reports are accurate and complete.
The oversight party can be given criteria under which they can remove your attorney-in-fact and appoint a new one if the current agent’s actions go beyond their standards for appropriate behavior.
New Mexico Financial & Family Law is highly experienced with power of attorney, estates, trusts, probate, and other critical life matters. We can help you select an ideal agent to operate as your proxy and set firm guidelines to limit their behavior, according to your own standards.
Whether you want to designate an attorney-in-fact to assist you with your busy schedule or only step in when you become incapacitated, we are here to help you make the perfect financial power of attorney arrangements for your needs.
Get started creating your power of attorney documents — and including them in a comprehensive estate plan — when you call 505-503-1637 or contact us online to schedule your appointment with an experienced lawyer in New Mexico.
CallCall now to schedule your consultation 505.503.1637
Office