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Court of Wills, Estates & Probate

The following articles were written by former Probate Judge Merri Rudd.

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Financial Powers of Attorney

09/25/2003
10:35 AM
Merri Rudd

Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.

Q: Could you discuss naming a child who does not live in New Mexico to be given power of attorney for financial affairs when one becomes incapacitated? V.M., Albuquerque

A financial power of attorney allows you, the principal, to appoint an agent (also called an "attorney in fact") to make business decisions on your behalf. You must be mentally competent to create a power of attorney. You should sign a financial power of attorney in the presence of a notary public, who then notarizes the document.

New Mexico law does not require your agent to be a New Mexico resident. You can appoint any trustworthy individual. With today's technologies, serving as an agent from afar is usually manageable.

A power of attorney may become effective immediately or it can "spring" into action only if you become incapacitated. To remain in effect if the principal becomes incapacitated, a power of attorney must contain specific language of "durability."

New Mexico has a "do it yourself" power of attorney form, but many attorneys use their own form. New Mexico law generally recognizes powers of attorney made in other states.
All powers of attorney end at the principal's death.

Some businesses hesitate to accept a power of attorney, especially when it is used to sell real estate or stock. If you want your agent to sell your home or land, identify the real estate by its address or legal description in the power of attorney. Your agent should be able to find title companies that will honor the power of attorney.

Usually powers of attorney do not need to be recorded. If, however, the agent uses the power of attorney to handle real estate transactions, the power of attorney must be recorded in the office of the county clerk where the real estate is located. 

Some stock brokerage firms prefer that you use their own power of attorney form. This could prove burdensome if you own stocks or bonds with several different firms. A conflict could arise between your regular financial power of attorney and the stockbroker's power of attorney, particularly if you appoint different people to serve as your agent in each document.

A brokerage firm may honor a general financial power of attorney if it includes the power to sell stocks and bonds. Talk to your broker when you sign a power of attorney to see if the firm will honor it.

Insurance companies may require a specific reference in the power of attorney to the authority of the agent to transfer ownership of the policy, cash in the policy, change a beneficiary, or make any other disposition under the policy. Including the name of the insurance company and policy number in the document might persuade the insurance company to honor the power of attorney.

For estate planning purposes, the power of attorney must specifically authorize the agent to make gifts, if that is a power you wish to give your agent.

The Internal Revenue Service (IRS) prefers its own power of attorney Form 2848 for taxes. IRS Forms are available free by calling 1-800-829-3676. The Social Security Administration requires a representative payee to be appointed to handle benefit payments.

Showing the power of attorney to your bank, stockbroker, insurance company, or other company before your agent must use the power of attorney could prevent problems later.

If you become incapacitated and your power of attorney is insufficient, your family can go to court and have a conservator appointed to handle your business affairs.

Appeared September 25, 2003, Albuquerque Journal, Business Outlook 
Reprinted with permission

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