A broad durable financial power of attorney typically intends to give your agent the ability to act on your behalf in just about any setting other than medical decision making. However, the IRS, and some financial institutions, will only accept their own power of attorney form for you to appoint an agent.
Springing or Surviving?
A financial power of attorney can be either springing or surviving. Springing means that your agent can act on your behalf only if you are unable to act. Your power of attorney should clearly define what it means for you to be unable to act. This can include your incapacity, disability or disappearance. This definition should also include what is needed to prove your inability to act. Springing financial powers of attorney generally require a doctor’s report confirming the principal’s incapacity before the agent can act.
A surviving financial power of attorney is immediately effective upon executing the document. We frequently recommend people choose to create a surviving power of attorney. The surviving power of attorney allows your agent to act more quickly in an emergency. Requiring a doctor’s report could delay your agent’s ability to pay your bills or get you the care you need.
A Broad Financial Power of Attorney
Having a financial power of attorney with broad powers allows your agent to assist you in future emergencies you may be unable to predict.
A broad financial power of attorney will also give your agent the power to prepare your federal and state income and gift tax returns. It would also generally allow your agent to represent you before the IRS in tax matters. But will this meet the IRS requirements? Not without a listing of specific tax years in which your agent can act on your behalf.
IRS Form 2848 Power of Attorney
The IRS Form 2848 allows you to designate a power of attorney for purposes of dealing with the IRS on specific matters. Your representative must be an attorney, certified public accountant, enrolled agent, officer, full-time employee, family member, enrolled actuary, unenrolled return preparer, qualifying student or law graduate or an enrolled retirement plan agent. But you do not need to use the IRS Form 2848 for your financial power of attorney to represent you on tax matters.
Substitute Form 2848 Power of Attorney
The IRS will allow you to use a power of attorney other than the form 2848 if it meets the requirements under 26 CFR 601.503(a). The power of attorney must contain: the name and mailing address of the taxpayer, the identification number of the taxpayer, the employee plan number (if applicable), the name and mailing address of the recognized representative(s), a description of authorized matters and a clear expression of the taxpayer’s intention. The description of authorized matters must include: the type of tax involved, the Federal tax form number, the specific years involved and, in estate matters, the decedent’s date of death.
Other Financial Institutions
After you execute a new financial power of attorney, you should present it to your bank and other financial institutions to make sure they will accept it. Even if your power of attorney is legally valid, they may have additional requirements or require that you use their own power of attorney form. They may only accept powers of attorney executed in the last five years. They may only accept powers of attorney witnessed by two individuals and notarized, even if that is not required by the law in your state.
You will want to make sure your bank accepts your durable financial power of attorney and it meets the IRS requirements. If either institution does not accept the document, even if it is legally valid, you may want to create a new one.