Financial power of attorney can be a convenience in some cases — and a necessity in others. Issuing a power of attorney allows someone (known as your agent, proxy, or attorney-in-fact) to take care of tasks that, under normal circumstances, only you could handle. Examples of possible tasks your agent could manage include opening a bank account, making adjustments to investment accounts, closing on a home sale, or settling a lawsuit on your behalf.
Your power of attorney is a document that describes the exact powers your agent will wield. You have the option to limit their power to specific matters, or you can give them wide discretion to handle nearly all of your affairs.
A financial power of attorney is often recommended by a Santa Fe estate planning attorney. That’s because documents prepare you for a time when you may be unable to take care of your finances on your own. Your agent can be there to help manage your affairs, especially in situations where you are unconscious or lose the mental acuity needed to fully understand your finances.
You can talk to an experienced lawyer about drafting a financial power of attorney after scheduling an appointment with our Santa Fe law firm. Call (505) 503-1637 or contact us online to schedule your confidential, no-obligation appointment today.
The term “power of attorney” technically refers to the document that is used to designate someone else as your agent. There’s no legal requirement to use a specific document or form, but templates based on New Mexico’s statutory version of power of attorney are readily available from institutions like the University of New Mexico.
To authorize someone to act as your agent, you, as the principal, cannot be mentally incapacitated. This requirement means that you must be a competent adult (or an emancipated minor) who has the ability to understand what your financial power of attorney does and how it could affect your holdings.
While having the capacity to do so, you can execute a financial power of attorney by writing a document (or using a pre-written form) that clearly states the following:
New Mexico POA requirements state that you must sign the document once it is complete. If you are unable to sign it yourself, you can have someone else sign it for you in your physical presence.
State law also suggests that you should sign the document in front of a notary public (NM Stat § 45-5B-105), who can certify that your signature is genuine. POA notarization in New Mexico is not technically required for a financial power of attorney to be effective, but it does negate the need for witnesses or other means to prove that your signature is authentic.
A “durable” financial power of attorney refers to one that remains active in Santa Fe even after the principal has become incapacitated.
New Mexico law (NM Stat § 45-5B-102) defines incapacity as the “inability of an individual to manage the individual’s estate or financial affairs, or both.” Incapacitation can be demonstrated by the principal mismanaging their finances. It can also be established if the principal has a medical condition that makes them unable to — or, in the near future, likely to be unable to — handle their own affairs.
Incapacitation can also technically refer to a situation where the principal is missing, detained, or currently outside the United States with no clear path for returning.
By arranging for durable financial power of attorney, the principal can have someone manage their finances, pay bills, conduct important transactions, and handle other critical financial affairs when they are unable to. The idea is to appoint someone you trust while you have the capacity and legal authority to do so. Otherwise, the court will have to appoint a conservator through a complex and public proceeding. They may not pick someone you would prefer, and they will not limit their power to the extent you are able to within your power of attorney document.
Another benefit of a power of attorney is that you can nominate your preference for a conservator in the document. This conservator can be the same person as your agent or a different person, depending on your preferences.
You can meet with a lawyer from an estate planning law firm in Santa Fe who can help you come to the right decisions. They can assist you with incapacity planning, including the creation of a durable financial power of attorney and an advance healthcare directive.
A financial power of attorney is considered effective the moment it is signed and executed (NM Stat § 45-5B-109), unless the principal states on the document that it does not become effective until a future date or condition.
As part of their power of attorney, a principal can delay its activation until:
The last condition can create what is known as a “springing power of attorney.” These remain inactive until the principal has lost capacity. This type of document is a fairly common component of incapacity planning, but it may not be recommended for all cases. Refer to a Santa Fe estate planning attorney for more guidance on what activation condition could best fit your long-term goals.
Note that you may need to directly inform banks, investment firms, and other institutions about your agent’s status and permissions. These businesses may require that you complete and sign a separate authorization form. Failing to do so could result in an agent being unable to access an account or perform certain transactions without further proof of their authority. This situation often requires the assistance of an experienced lawyer in Santa Fe to mitigate, so be sure to verify what is needed for each institution to recognize your agent’s financial power of attorney to avoid delays, complications, or preventable expenditures.
A power of attorney (and the individual agent’s authority) is always terminated when the principal dies (NM Stat § 45-5B-110). If the principal elected to make their power of attorney non-durable, the agent’s authority terminates whenever the principal becomes incapacitated.
The principal can also state another condition, other than their incapacitation, that causes the power of attorney to automatically revoke. Examples include a power of attorney that is automatically revoked after:
The principal can also terminate their financial power of attorney or an agent’s status at any time while they have the mental capacity to do so. They should create a document declaring their revocation of power of attorney and sign it — preferably in the presence of a notary. Alternatively, they can perform a “revocatory act” that physically destroys the document.
A principal can also include other methods that would allow them to instantly revoke their financial power of attorney. For example, they can state that an email informing the agent that their status has been terminated should be sufficient. A lawyer who is experienced with fiduciary arrangements and incapacity planning can assist you with these decisions regarding power of attorney in Santa Fe.
Your financial power of attorney can grant your agent the exact level of authority that you need. Unless you limit them, they are able to handle nearly any financial or business task you could, under the confines of the law.
You can provide your agent with general statutory powers, which are described in New Mexico Statutes Amended 45-5B Part 2. These abilities may be appropriate if your goal is to plan for your possible incapacity, as you won’t be able to modify your power of attorney after you have been incapacitated. Alternatively, you can review all of these powers and limit them according to your exact goals and needs.
In brief, an agent with general financial power of attorney has permission to handle transactions and other tasks involving all of the following:
However, unless the document specifies otherwise, an agent with general authority may not do the following (NM Stat § 45-5B-201):
To reiterate, you are able to restrict your agent in any manner you see fit. You can limit their ability to access certain accounts, place limits on how much they can withdraw or transfer from said accounts, require them to only make certain modifications (e.g., a $1,000 weekly deposit), or otherwise provide specific instructions, details, and limitations.
You can refer to a Santa Fe estate planning law firm that is familiar with financial power of attorney arrangements to go over your options, understand common strategies, and settle on the perfect approach for your unique situation.
An agent is legally obligated to conduct themself in a way that is in the principal’s best interest. They must also uphold certain responsibilities (NM Stat § 45-5B-114), which are collectively referred to as their “fiduciary duties.”
As a fiduciary, your agent’s responsibilities include:
If your agent fails to uphold these duties, they could be removed by a court order. A family member, government entity, or other party with an interest in your welfare can petition the court for your agent’s removal if they observe the agent breach their fiduciary duty.
You can provide your agent with instructions in your financial power of attorney. You can also bake in automatic protections, such as a requirement for your agent to make regular reports to a trusted advisor or family member.
A Santa Fe estate planning attorney can help you consider the situations you want to prepare for. They can then recommend best practices that minimize the risk of foul play, incompetence, abuse, or other actions that could harm your estate plans.
In many ways, a durable financial power of attorney is one of the most important estate planning documents you can have. With the proper care and due diligence, you can create a power of attorney that leaves you feeling confident and prepared, even in the face of an uncertain future.
New Mexico Financial Law is a client-centered law firm in Santa Fe that’s ready and willing to help you with your financial power of attorney arrangements. We’ll listen closely to your goals and recommend an ideal set of powers, restrictions, and other terms to guide your agent towards success.
Get help creating your unique power of attorney arrangements when you call our firm at (505) 503-1637 to schedule a no-obligation case review.
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