Detailed Answer
This section explains, in plain language, the types of powers a financial (also called “durable”) power of attorney (POA) typically gives the agent you name, and how California law controls those powers.
Core idea. A properly drafted financial power of attorney gives the agent legal authority to manage the principal’s money and property. The scope can be broad or narrow depending on what you (the principal) grant. In California, the Probate Code governs powers of attorney and includes rules about what an agent may do, what an agent may not do unless expressly authorized, and what formalities the document must meet. See the California Probate Code and the Judicial Council forms for the statutory POA options: California Probate Code (Probate) and general information on powers of attorney at the California Courts site: courts.ca.gov — Power of Attorney.
Common powers a financial POA can grant
- Bank and cash management: Open, close, and manage checking and savings accounts; deposit and withdraw funds; endorse checks and negotiate instruments.
- Bill payment and expenses: Pay your bills, mortgage, rent, utilities, and other routine expenses.
- Investment and brokerage authority: Buy, sell, transfer, and manage stocks, bonds, mutual funds, and other investments; exercise voting rights in investments when authorized.
- Real estate transactions: Buy, sell, lease, refinance, or manage real property you own, if your POA includes real property powers.
- Tax matters: Prepare, sign, and file tax returns; correspond with the IRS and state tax agencies; claim refunds and handle audits.
- Business affairs: Operate, sell, or close a business you own; sign business contracts; manage payroll and business banking (if expressly authorized).
- Government benefits and insurance: Apply for and manage Social Security, VA, Medi-Cal or Medicare matters, and handle insurance claims and benefits.
- Retirement accounts and pensions: Manage distributions and transactions for IRAs, 401(k)s, and pensions (note: some plan administrators may require additional documentation).
- Digital assets: Access and manage online accounts and digital property if your POA includes digital asset language.
Special authorities that usually require explicit language
California law treats some powers as sensitive and generally requires explicit, written authorization in the POA document:
- Gifts: The agent can make gifts on your behalf only if the POA explicitly grants that power. The document should state limits (amounts, recipients, and purposes) to reduce risk and possible abuse.
- Creation, amendment, or revocation of trusts: If you want the agent to create or change a trust in your name, the POA should expressly allow trust powers.
- Transfer to agent or compensation-related transactions: Transactions that benefit the agent (self-dealing) require clear authorization and careful drafting to avoid allegations of misconduct.
- Disclaimers and disclaimers of beneficiary rights: Some matters—like making or revoking a will—are not permitted for an agent. Agents cannot execute or revoke a principal’s will.
Durability and when the POA takes effect
Durable POA means the authority continues if you become incapacitated. To create a durable authority in California, the document must state that the agent’s authority continues after the principal’s incapacity. A POA may also be “springing,” meaning it only takes effect upon a stated event (for example, a doctor’s written determination that you are incapacitated). If you want a springing POA, clearly state the triggering event and how incapacity will be determined.
Agent duties and legal limits
Under California law, agents owe fiduciary duties to the principal. These include acting in the principal’s best interests, avoiding conflicts of interest, keeping accurate records, and preserving the principal’s estate. Agents must follow any instructions in the POA and keep receipts and accountings of major transactions. Courts can review and reverse agent actions that breach fiduciary duties; beneficiaries and relatives can challenge suspected misuse.
Formalities and practical acceptance
To be effective and widely accepted, the POA should follow California formalities. Many financial institutions will insist the POA be notarized or witnessed and will have policies about accepting the document. The California Probate Code sets requirements for execution and signature formalities. If you use the Judicial Council statutory form for a power of attorney, it includes checkboxes and explicit language to grant certain powers and to create a durable authority. For the exact statutory language and required formalities, see the Probate Code and the Judicial Council forms on leginfo.legislature.ca.gov and courts.ca.gov/forms.
Practical examples (hypothetical)
Example 1 — Broad durable POA: You sign a POA that names an agent and expressly states it remains in effect if you are incapacitated. You check boxes that permit banking, investments, real estate transactions, tax filings, and limited gifts. If you later develop dementia, your agent can manage your bank accounts, pay bills, sell a property if needed, and file tax returns.
Example 2 — Limited or springing POA: You do not want the agent to act while you are competent. You use a springing POA that requires a physician’s written determination that you are incapacitated. The agent can act only after that determination and only for the powers you listed (for example, paying bills but not selling real estate).
How California law protects principals and third parties
California statutes and case law impose duties on agents and allow third parties to require proof of authority before accepting a POA. If a third party unreasonably refuses to accept a valid POA, statutes provide remedies, and a court may compel acceptance. If an agent misuses a POA, the principal (or others) can seek removal of the agent, damages, and other relief through the probate court.
Where to look in the law. The California Probate Code contains the state’s provisions on powers of attorney. For statutes, official text is available from the California Legislative Information website: California Probate Code. For practical forms and step-by-step self-help, see the California Courts’ resources on powers of attorney: Power of Attorney — California Courts.
When to get an attorney. If your finances are complex—significant real estate holdings, business ownership, complicated tax situations, or blended family issues—talk to an attorney experienced with estate planning and fiduciary law to draft language that clearly reflects your intentions and minimizes future disputes.
Disclaimer: This article provides general information about California law and does not constitute legal advice. For legal advice tailored to your situation, consult a licensed California attorney.
Helpful Hints
- Choose a trusted agent who understands money management and who will act in your best interest.
- Be specific in the document. List powers you want to give and any limits or instructions (e.g., gift limits, sale of property conditions).
- Make the POA durable if you want it to continue after incapacity. Use clear language that it remains effective on incapacity.
- Consider a successor agent in case the primary agent cannot serve.
- Decide whether you want a springing POA (and define how incapacity is determined) or one effective immediately.
- Use the Judicial Council statutory form or have an attorney draft the document to reduce the chance institutions will refuse it.
- Notarize the document or follow California’s witnessing rules to improve acceptance by banks and other institutions.
- Review beneficiary designations and titles (retirement accounts, life insurance, property with joint tenancy) — a POA does not override beneficiary designations or survivorship rights.
- Keep copies with your agent and give copies to banks and relevant institutions in advance. Keep the original in a safe but accessible place.
- Revoke a prior POA in writing if you change agents or your instructions. File or give the revocation to institutions holding it.
Resources: California Probate Code (official statutes): leginfo.legislature.ca.gov. California Courts power of attorney resources and forms: courts.ca.gov — Power of Attorney. If you need help finding a local attorney, consider contacting your county bar association for referrals.
Disclaimer: This is educational information only and is not legal advice. For advice specific to your circumstances, consult a licensed attorney in California.