A Power of Attorney (POA) is an important tool in a comprehensive estate plan. The recent article “Top Ten Facts About Powers of Attorney” from My Prime Time News, explains how a POA works, what it can and cannot do, and how it helps families with loved ones who are incapacitated.
Powers of Attorney are legal documents that appoint an Agent or Agents to act in financial, legal, or medical decision making. This protects the individual in case of incapacity, and can help a family avoid having to go to court to obtain a guardianship.
Powers of Attorney can be broad or narrow. An Agent may be granted authority to manage a single transaction, for example, the sale of a home. A General Power of Attorney could give the Agent the authority handle all of a person’s financial and legal affairs. A POA should be created by an experienced elder law estate planning attorney as part of a strategic plan to manage the principal’s assets. A generic POA could create more problems than it solves if the individual experiences special circumstances like needing to qualify for Medicaid, trust creation, or gifting assets. Another reason to consult with an elder law estate planning attorney is to ensure that your Power of Attorney documents are written with the specific language required by your State.
A Financial Power of Attorney can be springing, or durable. A springing POA only becomes effective upon the incapacity of the grantor. This can raise problems for the Agent who may have to provide evidence of incapacity. A better option is a durable power of attorney which is effective immediately once executed, and remains in effect unless revoked.
Your Agent is charged with reporting any financial abuse and taking appropriate action to safeguard your best interests. If your Agent fails to notify you of abuse or take actions to stop the abuser, they may be liable for reasonably foreseeable damages that could have been avoided.
The Agent must never use your property to benefit themselves, unless given authority to do so. This gets sticky, if the grantor and the Agent own property together. You may need additional documents to ensure that the proper authority is granted, if your POA and you are in business together, for example.
The Agent’s authority under a Power of Attorney is only effective while the person is living. It ends upon the death of the principal. At that point in time, the executor named in the last will or an administrator named by a court are the only persons legally permitted to act on behalf of the decedent.
Every situation is different, and every state’s laws and requirements are different. It will be worthwhile to meet with an elder law estate planning attorney to ensure that the documents created will be valid and to perform as desired.
Reference: My Prime-Time News (April 10, 2021) “Top Ten Facts About Powers of Attorney”