The powers given by a power of attorney can be broad or limited.
Incapacity planning is essential for any adult.
One key document for managing personal and financial affairs is a power of attorney (POA).
By allowing you to legally name a representative to oversee your financial decisions if you are ill, traveling, or incapacitated, this document prevents loved ones from having to seek a conservatorship from the courts.
Not all powers of attorney are nor should be the same.
You may choose to make the authority granted to your agent broad or decide to limit the responsibilities to specific tasks.
The language will need to support your goals without creating hurdles for the agent's ability to fulfill the role.
Reviewing and understanding the powers granted in a power of attorney document helps protect the financial future of those who may need to utilize this tool.
Working with an experienced estate planning attorney to create a power of attorney can bring peace of mind.
Although powers of attorney are customizable, there are some common powers people choose to include.
What are these?
A general durable power of attorney can allow people to buy or sell real estate, manage bank accounts, pay bills, manage investments and retirement accounts, file taxes, or collect government benefits.
Individuals may elect to limit their powers of attorney to a single authority, such as selling a home.
In these instances, people would be utilizing a special or limited durable power of attorney rather than a general durable power of attorney.
You may be wondering what is meant by a "durable" power of attorney.
Is it more likely to survive laundering while folded up inside a pair of blue jeans?
No, "durable" means the powers authorized will continue to be effective when the principal (i.e., the person for whom the power of attorney is created) becomes incapacitated.
After all, you want the authority to remain active at that time anyway.
Right?
General and "springing" powers of attorney vary in terms of when they are active.
While a general durable power of attorney takes effect as soon as it has been signed, the "springing" power of attorney will only be effective under certain conditions, such as a medical certification of incapacity.
Although broad authorities are convenient, they can be risky.
When the powers granted are unclear or too general, your agent could either take actions you do not intend or face rejection from financial institutions that refuse to honor the document.
Insurance companies, banks, and other institutions often require specific language in a power of attorney before others can access or manage accounts and investments.
Failing to keep your power of attorney updated or making it too vague may require court intervention or create expensive delays.
Yikes!
Working with an experienced estate planning attorney to create and regularly review the language of your powers of attorney will ensure the document carries out the intended purpose.
Even with broad authorities, there are existing limitations to what an agent can do under any power of attorney.
What are these?
A power of attorney agent cannot transfer the authorities granted to them to another individual, unless specifically authorized in the document.
They cannot create your last will or change your existing last will.
Agents cannot work beyond the scope of authority outlined in the document.
Finally, assets cannot be used for the personal benefit of the agent without the expressed permission of the asset owner.
In addition to these limitations, the nature of a power of attorney means it is only effective while the principal is alive.
Once you die, the powers terminate, and authority over asset management is then the domain of the executor of your last will or the trustee under your revocable living trust.
While the language of the document can provide some protection over your assets, it is equally important to select a capable, organized, and trustworthy individual to serve as your agent.
For a power of attorney to be effective, it must be properly drafted, executed, and accepted by the financial institutions.
The best way to ensure your document meets state requirements, includes the appropriate powers, and aligns with your estate plan is to work with an experienced estate planning attorney.
Estate planning attorneys can also help you navigate selecting a good power of attorney agent, avoiding common POA pitfalls, and outlining appropriate conditions for the document to take effect.
If you do not yet have the protections of powers of attorney, request a consultation with our Overland Park estate planning law firm.
Powers of attorney can grant specific or broad authority to the designated agents.
Because financial institutions often require specific language, overly broad or vague powers of attorney may not be recognized by these organizations.
Even with fairly broad authorities granted in the document, agents will not be able to change your estate planning documents.
Because powers of attorney are incapacity tools, they lose their functionality after the death of the creator when the executor or trustee of the estate takes over asset management.
Regularly reviewing your power of attorney documents can help ensure they remain updated and aligned with your current circumstances and applicable state laws.
Working with an experienced estate planning attorney is the best way to protect you and your interests.
This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: Kiplinger (Dec. 27, 2022) "5 Mistakes to Avoid When Writing a Financial Power of Attorney"
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