“The person signing the power of attorney, which gives someone else the authority to act for them, is called the ‘principal’ and the person who is given the power to act for you is called your ‘agent.’”
Power of attorney is an important tool in estate planning. 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.
The agent’s authority as power of attorney (POA) 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 decent.
An incapacitated person may not sign a POA.
Powers of Attorney can be broad or narrow. A person may be granted POA to manage a single transaction, for example, the sale of a home. They may also be named POA to handle all of a person’s financial and legal affairs. In some states, such as Colorado, general language in a POA may not be enough to authorize certain transactions. A POA should be created with an 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.
You can have more than one agent to serve under your POA. If you prefer that two people serve as POA, the POA documents will need to state that requirement.
Banks and financial institutions have not always been compliant with POAs. In some cases, they insist that only their POA forms may be used. This has created problems for many families over the years when POAs were not created in a timely fashion.
In 2010, Colorado law set penalties for third parties (banks, etc.) that refused to honor current POAs without reasonable cause. A similar law was passed in New York State in 2009. Rules and requirements are different from state to state, so speak with a local estate planning attorney to ensure that your POA is valid.
In many cases, a POA is effective immediately upon execution. A Springing POA becomes effective when the conditions specified in the POA are met. This often includes having a treating physician sign a document attesting to your being incapacitated. An estate planning attorney will be able to create a POA that best suits your situation.
If you anticipate needing a trust in the future, you may grant your agent the ability to create a trust in your POA. The language must align with your state’s laws to achieve this.
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 himself, unless given authority to do so. This gets sticky if you 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.
Every situation is different, and every state’s laws and requirements are different. It is worthwhile to meet with an 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”