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Using a Power of Attorney for an IRA

IRA power of attorneyIf you are elderly, or your parents are elderly and you help them with their finances, you should consider getting a Power or Attorney (POA). A POA lets you name or appoint someone to handle important legal and financial issues for you, either now or in the future if you are unable to make decisions for yourself. A POA can also be used to manage or make decisions related to your IRAs.

A POA is a legal document that is based on your state’s law that authorizes someone to act on your behalf. In a POA, you are known as the grantor, principal, or donor of the power, and the person you choose to act on your behalf is known as the agent or attorney-in-fact. You choose someone you trust as your agent and you can limit their power, for example to only handle your IRAs, or you can give them very broad authority to handle virtually everything for you. You can change your mind down the road and revoke the POA. A nondurable POA will automatically expire when you die or become incapacitated, depending on your state’s law. A durable POA also expires after you die but remains in force if you become incapacitated.

POAs can be used to conduct business and make decisions related to your IRAs. Ideally, before you set up a POA that you want to use for your IRAs, check with the IRA custodian first. Some custodians have very specific procedures on if and how a POA will be accepted by them for use on your IRA. For example, some organizations may have additional documents that they want you to sign before a POA will be accepted. Check with the custodian before you finalize a POA to make sure they will accept it.

Also consider whether or not you want to put any limits on the powers you grant your agent. Things you might want to limit would be the ability to liquidate investments, move assets to riskier investments or to a different IRA custodian, or the ability to take more than the required distribution amount each year. Your power of attorney can be extremely valuable if you become incapacitated but it can also be abused. Be very conscious of this when you appoint an agent to hold a power of attorney.

Article Highlights

  • A Power of Attorney (POA) can be used on your behalf to make decisions regarding your IRAs
  • Check with the IRA custodian before the POA is finalized to make sure the custodian will accept it


- By Joe Cicchinelli and Jared Trexler

1 comments:

The broker we use offers their own POA paperwork, I brought my mother in law into a local branch, they kindly asked her in private if she was under duress, and then set up the POA.

For what it's worth, this lets me convert some of her IRA each year to Roth, then recharacterize the exact amount so she tops off her 15% bracket each year, and doesn't have her RMDs push her to 25%. I can do this for her in the background without having to push so much paper in front of her.

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