New Jersey Lawyers: Hanlon Niemann serving Monmouth County

What is a Power of Attorney and How Does it Work?

Duties as a Financial Power of Attorney

One of the most important legal documents an adult can put into place is a Durable Power of Attorney for Finances. This document, which can be signed by anyone age 18 or older, allows individuals to name someone to handle all of their financial decisions if they are ever unable to make them for themselves.

Most people mistakenly assume a spouse or adult child can step in and take care of these decisions if an accident or debilitating illness leaves their loved one without capacity. In fact, there are only two ways to obtain the right to handle the finances of another. One involves petitioning the courts for the right to act on behalf of a loved one and then providing the courts with an annual accountings of how funds were handled (often called a guardianship or conservatorship proceeding). The other is simply signing a Durable Power of Attorney before capacity is lost.

As simple as a Power of Attorney is to sign, the document should never be taken lightly. The person granting this power (the “Principal”) gives the recipient (the “Agent”) broad and sweeping power to handle their financial affairs. So, it is extremely important that the “Principal” really trust their Agent.

Someday, that person may be making all of their decisions about their money and their property. This means an Agent can sell real estate or spend and invest the Principal’s money without notifying the Principal or getting their approval. Depending on the way it is drafted, these powers can be used as soon as the document is signed or they can be withheld until after the Principal becomes incapacitated.

Laws in New Jersey allow for what is known as a “springing” Power of Attorney. This document grants the agent authority but only when one (or two) doctors declare the agent incompetent to make decisions for themselves. While this does have some advantages in certain situations, there are pitfalls.

An individual who is bedfast, confined to a nursing home or even away on a long vacation quickly realizes the advantages of having someone with the legal authority to handle financial matters, make trips to the bank or oversee and authorize home repairs.

You have the right to limit your Agent’s powers. You also have the right to revoke or take back a Durable Power of Attorney at any time as long as you are of sound mind. But, again, it is important to select an Agent you trust.

So, what are the responsibilities of an Agent? Anyone who takes on this role for a loved one has a duty (called a “fiduciary duty”) to exercise prudence and caution when dealing with he Principal’s assets. The Agent act in their best interest at all times.

The Agent can be held liable for any damages resulting from a breach of their duties. That means an Agent should keep very concise and accurate financial records. And Agent must not take any actions with regards to the Principal’s finances unless clearly authorized to do so.

An Agent is not entitled to use the money for their own benefit nor can they make gifts of the Principal’s money unless the Power of Attorney document specifically authorizes this. So, it’s important that the Agent always be clear when signing any document that they are acting on the principal’s behalf. For example, sign “Jane Doe, by her attorney-in-fact, John Doe.” This avoids personal liability for the agent.

The power of an Agent ends upon the death of the Principal. The Agent does not have the authority under a Durable Power of Attorney to handle the estate of their loved ones. This power must be granted in a Last Will and Testament or by the Probate court.

Before signing a Power of Attorney, it is important to consult a knowledgeable estate planning attorney to make sure the proper language is put in place to best suit your particular needs.

If you have any questions about the contents of this article, please call Fredrick P. Niemann personally at 732-863-9900 or e-mail him at fniemann@hnlawfirm.com.

The information contained in the Hanlon Niemann, P.C. ("HN" or the "firm") website is provided for informational purposes only, and should not be construed as legal advice or an offer to perform services on any subject matter. The content of this website contains general information and may not reflect current legal developments, verdicts or settlements. Recipients of contents from this site, clients or otherwise, should not act or refrain from acting on the basis of any content included in the site without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. HN expressly disclaims all liability with respect to actions taken or not taken based on any or all of the information or other contents of this site. Any information sent to HN via Internet e-mail or through the HN website is not secure and is done so on a non-confidential basis. The transmission of the HN site in part or in whole, and/or communication with HN via Internet e-mail through this site does not constitute or create an attorney-client relationship between HN and any recipients. The firm does not endorse, and is not responsible for, any third-party content that may be accessed through this website. Nothing herein is intended to create an attorney-client relationship and shall not be construed as legal advice. This is not an offer to represent you, nor is it intended to create an attorney-client relationship. The content of any e-mail sent to HN, or any of its attorneys at the e-mail addresses set forth in this website will not create an attorney-client relationship and will not be treated as confidential.

Copyright © 2007 Hanlon Niemann, P.C.. All rights reserved. All materials presented on this site are copyrighted and owned by Hanlon Niemann, P.C., or other individuals or entities as designated. Any republication, retransmission, reproduction, downloading, storing or distribution of all or part of any materials found on this site is expressly prohibited.

NO REPRESENTATIONS

This material may contain technical or typographical errors. HN does not guarantee its accuracy or completeness or suitability. IN NO EVENT SHALL HN BE LIABLE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS MATERIAL, FOR ANY USE OF THIS WEBSITE, OR FOR ANY OTHER HYPERLINKED WEBSITE. HN takes no responsibility and makes no warranty whatever for the content or information contained on sites linked to or from this site. All such links are provided on this website solely for the convenience of users and do not represent any endorsement, advertisement or sponsorship of linked sites or any products or services offered.


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		What is a Power of Attorney and How Does it Work? What is a Power of Attorney and How Does it Work? Duties as a Financial Power of Attorney One of the most important legal documents an adult can put into place is a Durable Power of Attorney for Finances. This document, which can be signed by anyone age 18 or older, allows individuals to name someone to handle all of their financial decisions if they are ever unable to make them for themselves. Most people mistakenly assume a spouse or adult child can step in and take care of these decisions if an accident or debilitating illness leaves their loved one without capacity. In fact, there are only two ways to obtain the right to handle the finances of another. One involves petitioning the courts for the right to act on behalf of a loved one and then providing the courts with an annual accountings of how funds were handled (often called a guardianship or conservatorship proceeding). The other is simply signing a Durable Power of Attorney before capacity is lost. As simple as a Power of Attorney is to sign, the document should never be taken lightly. The person granting this power (the “Principal”) gives the recipient (the “Agent”) broad and sweeping power to handle their financial affairs. So, it is extremely important that the “Principal” really trust their Agent. Someday, that person may be making all of their decisions about their money and their property. This means an Agent can sell real estate or spend and invest the Principal’s money without notifying the Principal or getting their approval. Depending on the way it is drafted, these powers can be used as soon as the document is signed or they can be withheld until after the Principal becomes incapacitated. Laws in New Jersey allow for what is known as a “springing” Power of Attorney. This document grants the agent authority but only when one (or two) doctors declare the agent incompetent to make decisions for themselves. While this does have some advantages in certain situations, there are pitfalls. An individual who is bedfast, confined to a nursing home or even away on a long vacation quickly realizes the advantages of having someone with the legal authority to handle financial matters, make trips to the bank or oversee and authorize home repairs. You have the right to limit your Agent’s powers. You also have the right to revoke or take back a Durable Power of Attorney at any time as long as you are of sound mind. But, again, it is important to select an Agent you trust. So, what are the responsibilities of an Agent? Anyone who takes on this role for a loved one has a duty (called a “fiduciary duty”) to exercise prudence and caution when dealing with he Principal’s assets. The Agent act in their best interest at all times. The Agent can be held liable for any damages resulting from a breach of their duties. That means an Agent should keep very concise and accurate financial records. And Agent must not take any actions with regards to the Principal’s finances unless clearly authorized to do so. An Agent is not entitled to use the money for their own benefit nor can they make gifts of the Principal’s money unless the Power of Attorney document specifically authorizes this. So, it’s important that the Agent always be clear when signing any document that they are acting on the principal’s behalf. For example, sign “Jane Doe, by her attorney-in-fact, John Doe.” This avoids personal liability for the agent. The power of an Agent ends upon the death of the Principal. The Agent does not have the authority under a Durable Power of Attorney to handle the estate of their loved ones. This power must be granted in a Last Will and Testament or by the Probate court. Before signing a Power of Attorney, it is important to consult a knowledgeable estate planning attorney to make sure the proper language is put in place to best suit your particular needs. If you have any questions about the contents of this article, please call Fredrick P. Niemann personally at 732-863-9900 or e-mail him at fniemann@hnlawfirm.com. The information contained in the Hanlon Niemann, P.C. ("HN" or the "firm") website is provided for informational purposes only, and should not be construed as legal advice or an offer to perform services on any subject matter. The content of this website contains general information and may not reflect current legal developments, verdicts or settlements. Recipients of contents from this site, clients or otherwise, should not act or refrain from acting on the basis of any content included in the site without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. HN expressly disclaims all liability with respect to actions taken or not taken based on any or all of the information or other contents of this site. Any information sent to HN via Internet e-mail or through the HN website is not secure and is done so on a non-confidential basis. The transmission of the HN site in part or in whole, and/or communication with HN via Internet e-mail through this site does not constitute or create an attorney-client relationship between HN and any recipients. The firm does not endorse, and is not responsible for, any third-party content that may be accessed through this website. Nothing herein is intended to create an attorney-client relationship and shall not be construed as legal advice. This is not an offer to represent you, nor is it intended to create an attorney-client relationship. The content of any e-mail sent to HN, or any of its attorneys at the e-mail addresses set forth in this website will not create an attorney-client relationship and will not be treated as confidential. Copyright © 2007 Hanlon Niemann, P.C.. All rights reserved. All materials presented on this site are copyrighted and owned by Hanlon Niemann, P.C., or other individuals or entities as designated. Any republication, retransmission, reproduction, downloading, storing or distribution of all or part of any materials found on this site is expressly prohibited. NO REPRESENTATIONS This material may contain technical or typographical errors. HN does not guarantee its accuracy or completeness or suitability. IN NO EVENT SHALL HN BE LIABLE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS MATERIAL, FOR ANY USE OF THIS WEBSITE, OR FOR ANY OTHER HYPERLINKED WEBSITE. HN takes no responsibility and makes no warranty whatever for the content or information contained on sites linked to or from this site. All such links are provided on this website solely for the convenience of users and do not represent any endorsement, advertisement or sponsorship of linked sites or any products or services offered.

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