Powers of Attorney are necessary for incapacity planning.
It is impossible to predict the future.
Sudden illnesses, car accidents, or work injuries can leave you and your family in a precarious position.
This danger is heightened if you failed to put fundamental legal protections in place.
According to a recent My Prime Time News article titled “Top Ten Facts About Powers of Attorney,” this fundamental legal document is essential when it comes to protecting everything you have and everyone you love.
So, what is a power of attorney?
It is a legal document whereby one adult, known as the principal, grants authority to another adult, known as the agent or attorney in fact, to handle financial matters, especially should the principal become incapacitated.
To continue to have authority when the principal becomes incapacitated, the power of attorney must be “durable” and contain certain “magic” language.
When the principal dies, the even a durable power of attorney is no longer valid.
Instead, authority will be transferred to those designated in the last will and testament or trust created by now decedent principal.
What should you know about powers of attorney?
First, a power of attorney documents must be drafted and signed before the principal becomes incapacitated.
For this reason, you cannot delay.
In addition to accidents, incapacity can also be triggered through the progression of Dementia and Alzheimer’s Disease.
Another characteristic of note is that a power of attorney can be narrow or broad.
What does this mean?
A principal may grant an agent authority to handle a single transaction, like the sale of a home or automobile.
These are considered narrow powers.
Alternatively, a principal could grant authority to manage all legal and financial affairs.
This would be a “general” power of attorney.
Because different states have differing rules on appropriate language in a power of attorney document, you should work with an experienced estate planning attorney in your state of residence.
Generic or online documents can cause significant problems.
Can you name more than one agent?
The answer is yes.
If this is the case, the document will need to explicitly state two people are to serve in the role together, to include whether they may act alone without the concurrence or joinder of both required to transact business.
Although powers of attorney are legally valid documents, may banks and financial institutions are notorious for refusing to recognize them.
Some entities only allow for their own institutional forms to be used.
Some states like Colorado and New York have laws in place requiring third parties to accept a valid power of attorney document unless there is reasonable cause not to do so.
Once a power of attorney is signed it becomes effective.
A Springing Power of Attorney requires certain preconditions to be met before taking effect.
Often this involves a treating physician confirming in writing that the principal is incapacitated.
In some instances, you may need to give your agent specific authority to create a trust on your behalf.
Your agent has a fiduciary duty in this role.
Your agent will be be required to work in your best interests and report any indications of financial abuse.
What happens if the agent fails to report and protect you from abuse?
The agent may be liable for the avoidable damages.
The agent named in your powers of attorney is not permitted to use your property for personal benefit unless you grant specific authority to do so.
There may be more complications to navigate if you and your agent own property together.
To ensure your powers of attorney meet your unique circumstances, work with an experienced estate planning attorney.
Reference: My Prime-Time News (April 10, 2021) “Top Ten Facts About Powers of Attorney”