What if you were unable to manage your finances due to illness or old age? Who would you trust to handle your financial affairs? This is where financial power of attorney (FPOA) comes into play. In Colorado, like anywhere else, financial power of attorney is a legal arrangement that provides a framework for managing an individual’s financial affairs when they are unable to do so. It’s a document that a person – known as the principal – uses to give another individual – known as the agent or attorney-in-fact – the power to make certain decisions on their behalf during their lifetime. Here’s a closer look at financial power of attorney in Colorado and how to get one.
Need help managing your investments or planning your estate? Talk to a financial advisor today.
Financial Power of Attorney in Colorado
The primary purpose of a financial power of attorney is to ensure that a trusted person is handling the principal’s financial matters when they cannot do it themselves. This can encompass a myriad of tasks, such as:
- Paying bills
- Managing real estate
- Overseeing investments
- Filing taxes
While the agent holds substantial authority, it is bound by the terms of the power of attorney and the fiduciary obligation to act in the principal’s best interest.
Financial powers of attorney are durable in Colorado, meaning they continue even when a person becomes incapacitated. This is a critical concept to grasp, especially in scenarios where an individual becomes unable to handle their own finances due to illness. For instance, if an elderly person develops Alzheimer’s disease, an FPOA can ensure their bills are paid and investments managed.
Once appointed, an agent must adhere to the terms of the POA document. These responsibilities encompass making financial decisions and maintaining control over the principal’s financial accounts. In Colorado, the principal can also grant the agent authority to make specific decisions, including creating, amending or revoking a living trust, as well as creating and changing rights of survivorship or beneficiary designations.
However, financial power of attorney has its limits. For instance, the agent cannot continue to make decisions after the principal’s death. Financial power of attorney also doesn’t cover to healthcare decisions, which requires a separate legal power in Colorado.
Financial vs. Medical Durable Power of Attorney
While financial power of attorney grants an agent the authority to make certain financial decisions for someone who is unable to do so themselves, a medical durable power of attorney in Colorado does the same, but for healthcare decisions. You can appoint the same person for both roles, but these are distinct legal documents that serve different purposes.
In Colorado, a medical durable power of attorney can cover decisions about medical treatments, procedures and end-of-life care. Colorado law requires that a medical durable power of attorney document adheres to specific statutory language, ensuring clarity and compliance with state regulations. The medical durable power of attorney ensures that your healthcare decisions are made according to your preferences, even if you are incapacitated or unable to communicate.
Just like the financial power of attorney, it’s important to choose someone you trust explicitly to carry out your healthcare preferences.
How to Assign a Financial Power of Attorney in Colorado
Assigning a financial power of attorney in the Rocky Mountain State is a relatively simple process that requires you to fill out the State of Colorado Statutory Form of Power of Attorney and have it notarized. This document is particularly important due to state-specific laws such as the Colorado Uniform Power of Attorney Act that governs their use and validity.
Here’s a closer look at four general steps in the process:
1. Choose an Agent and Successor Agent
The first step in this process is choosing an agent. The choice of an agent is critical as they hold the power to make significant financial decisions on the principal’s behalf. For example, consider the case of a principal who has assigned their trusted friend as the agent. If this friend is not financially savvy or acts in their own interest instead of the principal’s, the principal’s assets could be at risk. Therefore, it’s crucial to carefully consider who is appointed as the agent.
When selecting an agent, it’s essential to consider their trustworthiness, financial knowledge and willingness to assume the responsibility. For instance, the agent should have a solid understanding of financial matters, a clean financial record and be able to make unbiased decisions that are in the best interest of the principal. It’s also advisable to choose a successor agent who can step in if the original agent is unable to fulfill their duties.
2. Complete POA Document
The power of attorney documents is vital as it gives legal validity to the assignment of financial power. It outlines the extent of the agent’s powers and protects the principal’s interests by setting boundaries on the agent’s authority. This document serves as a formal agreement between the principal and the agent, outlining the scope of powers entrusted to the agent.
To complete a power of attorney document in Colorado, the principal must detail the powers granted to the agent, specify when these powers come into effect, and use language consistent with Colorado law. The state’s legal forms for a power of attorney, which can be found through specific Colorado state resources, can be used to ensure compliance with all requirements. While the completion of this document should be done carefully, you may want to consult a legal professional to avoid any potential misunderstandings or disputes later on.
3. Sign and Notarize POA Document
In Colorado, it’s legally required for the power of attorney document to be signed by the principal and notarized to ensure its validity and enforceability. This process adds a layer of security and legitimacy to the document, ensuring that it meets all legal requirements and is acceptable in the eyes of the law.
The power of attorney document should be signed by the principal in the presence of a notary. In Colorado, notaries can be found in most banks, law offices or through mobile notary services. They will verify the principal’s identity and their willingness to sign the document voluntarily. This step is crucial in affirming that the principal is making the decision to assign power of attorney of their own accord and is fully aware of the implications.
4. Inform Financial Institutions
After the power of attorney document is completed, the principal or the agent should notify all relevant financial institutions. This usually involves providing them with a copy of the POA document and completing any forms required by the institution. These forms could include those that request the agent’s personal information or proof of the agent’s authority. It’s important to keep all relevant parties informed about the assignment of the POA to ensure a smooth transition and compliance with all legal requirements.
When Does Financial Power of Attorney End in Colorado?
Financial power of attorney in Colorado can end in one of several different ways.
First, financial power of attorney is durable, so it can continue until the principal dies. The authority granted under power of attorney is only valid during the principal’s lifetime. Upon their death, the arrangement automatically becomes invalid and the agent’s power expires. As a result, the death of the principal is a common way for power of attorney to end.
Meanwhile, if the principal decides that they no longer want the agent to have the authority to make financial decisions on their behalf, they can also revoke the power of attorney. This typically requires a written revocation notice that is delivered to the agent. It’s important to follow the legal requirements for revocation outlined in Colorado state law.
Additionally, the document may specify an expiration date or a triggering event that terminates its powers. If such conditions are included in the power of attorney document, the agent’s authority will end accordingly.
Bottom Line
Assigning a financial power of attorney in Colorado is a crucial process for ensuring the proper handling of one’s financial affairs in the event of incapacity. This procedure, which involves choosing an agent, completing and notarizing a POA document, and informing relevant financial institutions, is guided by specific laws and requirements. With careful consideration and proper execution, it can provide peace of mind and financial security for the principal.
Estate Planning Tips
- When a person dies, their estate typically goes through probate, which is the court-supervised process of validating a will, settling debts and distributing assets. This can be a potentially lengthy, costly and public process. However, there are ways to avoid probate, including transferring assets to a living trust or using transfer-on-death designations.
- Financial power of attorney is just one component of an estate plan. A financial advisor with estate planning expertise can help guide you through this critical process. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/RichLegg, ©iStock.com/designer491, ©iStock.com/lightphoto