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What to Know if You’re Getting Divorced and Your Spouse Holds Power of Attorney

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Posted on November 7, 2022 by Lisa Sharpe

Worried about a financial power grab in divorce?   A power of attorney can be like writing a blank check to your spouse.  Many married couples will sign powers of attorney as part of their estate planning documents, which provide broad authority to act on the other spouse’s behalf.  Estranged spouses have used powers of attorney to transfer their spouse’s assets to them, trade brokerage accounts, take out lines of credit in the name of their spouse, and sell assets.   The good news, at least in Washington State, is that filing a Petition for Divorce, Legal Separation or Annulment will usually invalidate the power of attorney.  This is not true in all states.

What is a Power of Attorney? A power of attorney is a legal document that allows you to appoint another person to manage your affairs. There are different types of power of attorneys.  It may be a durable power of attorney with broad powers to handle your fiscal and legal affairs., or it can be more limited, and only used in the event you become incapacitated. For example, a medical power of attorney gives your agent the authority to make health care decisions on your behalf.

When is it used?

A power of attorney can be used to make medical decisions, to sign legal documents, to buy and sell real estate, and for many other financial matters.

A power of attorney requires trust, and the downside is that they can be abused.  The person holding a power of attorney can take actions that are not in the principal’s best interest including withdrawal of funds and buying and selling real estate.

What happens to a power of attorney in divorce?

Spouses going through a divorce often do not trust each other.  In Washington state, filing an action for divorce, legal separation or annulment of a marriage will terminate a spouse’s power of attorney held for their respective husband or wife.  RCW 11.25.100.  The only exceptions are if the power of attorney states otherwise to exempt a divorce filing (or legal separation or annulment) or if the divorce filing (or legal separation or annulment) is dismissed.

In many states, power of attorney designations do not automatically end when people get divorced. If the document was created in: Alabama, California, Colorado, Illinois, Indiana, Kansas, Minnesota, Missouri, Ohio, Pennsylvania, Texas, Washington, or Wisconsin, the power of attorney is terminated. The remaining states, however, must have additional communication to revoke the existing power of attorney. The best practice is to sign a document to revoke the power of attorney to be sure.

If you have questions about how to protect your finances and rights during divorce, dissolution or collaborative divorce, the Family Law Practice Group at Lasher is ready to assist.