A Financial Power of Attorney is a legal document that authorizes an agent to act on behalf of the principal in managing financial matters. One important consideration when drafting a Financial Power of Attorney is whether it should include hot powers.

What Are Hot Powers?

“Hot powers” give the agent the authority to execute high-risk or significant financial transactions without additional approval. Examples include:

• Selling or transferring real estate
• Making large investments or withdrawals
• Closing or opening major accounts
• Creating or changing beneficiaries
• Creating or changing rights of survivorship
• Making gifts
• Creating or modifying trusts

Essentially, hot powers let the agent act quickly and decisively, even in situations that could have long-term consequences.

Pros of Including Hot Powers

• Flexibility and Speed: Hot powers allow the agent to act without waiting for consent, which can be crucial in emergencies.
• Convenience: The agent can handle complex transactions or respond to time-sensitive opportunities efficiently.
• Continuity in Case of Incapacity: If the principal becomes incapacitated, the agent can manage all financial affairs without interruption.

Cons of Including Hot Powers

• Risk of Abuse: Giving broad authority increases the chance of misuse or financial exploitation if the agent is untrustworthy.
• Limited Oversight: Hot powers can reduce the principal’s ability to monitor or control financial decisions.
• Trust Dependency: Including hot powers requires a very high level of trust in the agent’s judgment and integrity.

Making the Decision

Deciding whether to include hot powers depends on your priorities.  If you want maximum control and safety, you may want to limit or exclude hot powers or require additional approvals for major transactions.  Alternatively, if you want speed and flexibility, including hot powers for a trusted agent may allow for decisive action in critical situations.

This is a general summary of the law and should not be used to solve individual problems as slight changes in the fact situation may require a material variance in the applicable legal advice.

Written By:
Mark A. Wagner, Esq.
mwagner@kwgd.com
330-497-0700
Canton and New Philadelphia offices