Setting Up a Financial Power of Attorney

If you own investment real estate, securing a financial power of attorney (POA) may be an important tool for protecting and managing your assets. A POA may authorize a designated individual to oversee real estate and other assets if you become unable to do so. 

Understanding a POA’s role and actions can help you find the right entity to work with your investments. 

Defining a Financial Power of Attorney

A financial power of attorney gives an individual the authority to manage your finances and investments while you’re alive or if you become incapacitated. A POA’s duties can include asset management, paying bills, making charitable gifts, handling banking transactions, and overseeing beneficiary and estate transactions.

The types of POA include: 

• General POA: Grants broad financial decision-making powers
• Limited POA: Restricts authority to specific tasks or transactions.
• Durable POA: Remains in effect even if you become incapacitated
• Springing POA: Becomes active only under specific conditions, such as incapacitation

For investment property owners, a durable financial POA can help continuous property management even if you’re incapacitated.

Steps to Find a POA

Financial POA setups are different from state to state. However, the following are general actions you can take to find an effective POA.

#1–Select a Trusted Agent

There is more to finding a POA than simply asking a friend or relative to fill it in. The individual you select should:

• Be financially responsible and trustworthy
• Know how to manage real estate investments
• Understand your financial goals and obligations.
• Be able to act in your best interest and adhere to legal responsibilities

#2–Draft the POA Document

Each state has different rules regarding what should be included in such documents. Regardless, the basics should focus on:

• Consulting a state-licensed attorney. While generic templates exist, a lawyer who knows your state’s laws can tailor the document to your specific needs and legal requirements.
• Specifying the responsibilities. You must clearly outline your agent’s duties, such as managing rental income, paying property taxes, or selling assets.
• Outlining conditions. Another important aspect is timing, in other words, when the POA takes effect immediately or under certain conditions. Keep in mind that a POA is no longer valid when you die.

When the document is completed to your satisfaction, sign it. Many states require the POA document to be signed before a notary public or witness. Check your state’s requirements to ensure that your POA document is valid.

#3–Distribute Copies to Relevant Parties

Once you’ve finalized the financial POA, be sure to:

• Provide copies to the POA agent, attorney, and financial institutions.
• Notify property managers, lenders, and business partners if the agent will be handling real estate management or transactions.
• Store the original document securely, such as in a safe deposit box.

#4–Review and Update as Needed

Your financial POA should be reviewed periodically to ensure it aligns with your current financial situation. Update the document if:

• You acquire new properties or investments.
• Your chosen agent is no longer available or suitable.
• Laws change that impact the POA’s validity.

The Importance of a POA and Real Estate

A financial power of attorney can be a useful legal tool for investment property owners, offering protection and continuity in managing real estate assets. By choosing a reliable agent, drafting a legally sound document, and keeping it updated, may help facilitate continuity in managing real estate assets during unforeseen circumstances. 

If you need guidance on financial planning and wealth management for your real estate assets, contact the experts at Realized 1031 for advice and solutions. Visit realized1031.com to explore how the Realized experts can help you access insights on 1031 exchanges and strategies that may align with your real estate investment goals.

The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.