New Mexico Financial Powers of Attorney: What You Need to Know
When people think of estate planning, they tend to think of planning for what happens after they die. That is important, to be sure, but estate planning also addresses your needs while you are alive. Many people, during their lifetime, will be unable to manage their financial affairs.
That inability can take many forms. You could be out of the country temporarily and need someone to conduct financial transactions on your behalf. You could suffer a sudden illness or injury that renders you incapable of managing your assets and paying your bills. And, of course, as you age, you could develop Alzheimer’s disease or another form of dementia, requiring someone else to take over management of your finances.
A financial power of attorney is a legal document in which you (the principal) designate a person you trust (your agent) to handle your finances for you in the event you are unable to manage them yourself. Let’s talk about financial powers of attorney and how they can be used.
Types of Financial Power of Attorney in New Mexico
An agent under a financial power of attorney is a fiduciary. That means that they are obligated to act in the principal’s best interests. That said, you should always choose someone you trust completely to act as your agent. You can choose an individual you know personally, or a professional like a lawyer or accountant. A professional may charge a fee, which a family member usually will not, but you may feel more comfortable having a professional with financial experience in charge of your financial decisions.
Because the circumstances under which you might need a financial power of attorney vary, there are different types of power of attorney. A general financial power of attorney becomes void as soon as the principal is not legally capable of making decisions, cutting off the agent’s power. You might want a power of attorney like this if you need someone to physically transact your business (say, because you are out of the country or have mobility problems), but you want to make the decisions.
A “durable” financial power of attorney, on the other hand, survives your legal incapacity, allowing your agent to continue to conduct your business if you are in a coma, suffering from dementia, or otherwise unable to make reasoned decisions. A durable power of attorney can be “springing,” meaning that your chosen agent doesn’t have the right to act on your behalf unless and until you are unable to act for yourself.
It’s recommended for all adults to have a durable financial power of attorney. If you do not, and you become incapacitated, your loved ones will have to go to court to obtain conservatorship over your assets. This process can be costly and time-consuming, and the conservator might be someone other than the person you would have chosen. With a durable financial power of attorney in place, the agent of your choice seamlessly takes over for you without the need for court involvement.
A power of attorney can be very broad—encompassing almost all your financial affairs—or very narrow. For example, you might need someone to appear at a real estate closing on your behalf because you’re unable to, but you may not want or need them to transact any other business for you. Your financial power of attorney can be drafted to limit the powers you give your agent, as well as the intended duration of those powers. As long as you are not legally incapacitated, you can terminate a power of attorney you have granted at any time.
New Mexico Financial Power of Attorney Forms
You may be aware that New Mexico has a statutory form for financial power of attorney. Should you use a form, or have an attorney draft your financial power of attorney?
Surprisingly, the answer may be “both.” If you are looking for a power of attorney that is broad and/or durable, an attorney can make sure that your interests are protected and that your agent has precisely the powers you intend, no more and no less.
The statutory power of attorney form can be a bit confusing. For instance, it can only be modified in one section of the document. The form might state, for example, that your agent can make gifts on your behalf. If you don’t want them to be able to, you would then need to state that in the modifiable section of the form.
A form written by an attorney may be clearer, but the statutory form has one advantage. New Mexico law says that if you use the statutory form and someone refuses to honor your power of attorney, you can go to court to get it enforced. If you must do this, the other party has to pay your costs and fees.
Until this law went into effect, many large banks and brokerage firms refused to honor powers of attorney that were not on the company’s form. This resulted in principals with multiple accounts needing to have multiple powers of attorney, some of which were inconsistent with others, leading to confusion.
In our office, we sometimes use the statutory form to protect our clients from this outcome, and we modify it appropriately to achieve their goals. We recommend that even if you use a statutory form, you have an experienced New Mexico estate planning attorney customize it to your needs.
A power of attorney gives important legal rights to another person, so it is not something you should undertake lightly or without full understanding of the legal implications. We invite you to contact our law office to schedule a consultation if you have any questions about New Mexico financial powers of attorney.