VOL. 133 | NO. 114 | Thursday, June 7, 2018
Putting the ‘Power’ in Power of Attorney
Jennifer L. Sneed
When I discuss estate planning with people, I am usually met with one of two responses: “I haven’t gotten around to it,” or, “I don’t need any.”
Estate planning, or financial and health preparedness, is often presumed to be only for the elderly or the wealthy. In truth, however, thoughtful planning can enable any legally competent adult to make their financial and health care decisions before they become incapacitated or pass away, sparing themselves or their loved ones the expense and complication of trying to resolve those questions later.
In this monthly article, I’ll identify some of the most common estate planning concerns, and some of the tools designed to help resolve them. This first article discusses one of the most frequently overlooked estate planning tools: the general Durable Power of Attorney (POA).
A POA is the written authority Person A (the “principal”) grants to Person B (the “attorney-in-fact” or “agent”) to act in Person A’s stead. In the estate planning context, a POA enables legally competent adults to designate a trusted individual as agent to act on their behalf.
Many general POAs are durable, meaning they remain in effect after you’ve become incapacitated. POAs can take immediate effect, or they can be springing POAs, meaning they only take effect after you’ve become incapacitated. Additionally, some POAs, known as health care POAs, specifically address health and medical decisions. (Health care POAs will be discussed in a later article.)
When executing a POA, you must first decide what specific powers you want to confer. A general durable POA grants your agent, to the extent that you designate, the authority to make legally binding decisions on your behalf, such as giving and receiving money, buying and selling property, and accessing and using digital, bank, mortgage and other accounts.
A POA may also be drafted to enable you to avoid a court-supervised conservatorship in the event that you later become disabled. For this reason, your POA must clearly establish your intent to authorize your agent to exercise authority if you become incapacitated.
You can use your POA to grant a very broad or limited amount of power, so you should consult an experienced attorney when drafting a POA. Also, POAs lose effect after you die. If you want your agent to act for you after you’ve passed away, you’ll need to execute a different document, such as a last will and testament.
Under a general POA, you may choose to grant your agent the ability to make financial decisions on your behalf. This kind of financial relationship is called a fiduciary relationship, and as your fiduciary, your agent is legally required to use the POA for your sole benefit, and to account to you for every financial decision they make on your behalf. An agent generally retains their authority to act until you revoke your POA or die, so it is very important to choose a trustworthy agent to reduce the likelihood of abuse.
When thoughtfully executed and used, POAs can be effective estate planning tools. In the next article, I’ll discuss the purpose and use of durable health care POAs.
These articles are purely informational, and do not constitute legal advice. As with all legal issues, please consult an attorney when determining your estate planning needs.
Jennifer L. Sneed is an associate with Bourland, Heflin, Alvarez, Minor & Matthews PLC.