What is a power of attorney?
A power of attorney is a document that you sign to give another person authority to manage your affairs. When you sign the form, you name a specific person to serve as your “agent” or “attorney in fact” to act on your behalf. The duties may include signing legal documents or handling financial matters.
A power of attorney does not eliminate your power over your own matters, and you are still able to make your own decisions. Rather, implementing a power of attorney allows another individual to share your power. The powers granted under a power of attorney can be very broad or limited to a specific event.
For example, you may grant an agent power of attorney to sign a deed for your property in your absence. It should be noted that all powers of attorney are not the same. Some powers of attorney will actually force the agent to spend all of the principal’s money and will not allow any spend down or gifting to accelerate eligibility for public benefits.
What is a durable power of attorney?
A durable power of attorney is similar to an ordinary power of attorney in that you grant another individual authority to serve as your agent and handle financial matters for you.
However, an ordinary power of attorney ceases to be valid if you become mentally incapacitated. A durable power of attorney does not. Under a durable power of attorney, your agent is required by law to act in a manner that is best for you both financially and physically.
Why do I need a durable power of attorney?
Every adult should have a durable power of attorney because nobody can predict the future. A durable power of attorney ensures that a person, whom you have chosen and trust, is ready and able to handle your financial affairs if you are unexpectedly unable to do so yourself because of an accident, illness, or absence.
If you do not have a durable power of attorney and you become incapacitated or mentally unfit, then your family members may have to file with the Probate Court to have someone appointed to handle your affairs.
Preparing ahead of time allows you to have control of who will handle your affairs for you. Also, having an agent empowered to act on your behalf will avoid lengthy delays and eliminate the costs and stresses of court.
What should I consider when organizing my durable power of attorney?
In the video, Vinny discusses the value of getting legal counsel while drafting and organizing your durable power of attorney papers. He is extremely frank about the several pitfalls that can occur when filling out a simple form you get from a public notary on your own.
Do I need a durable power of attorney even if I have a revocable living trust?
Absolutely yes. The individual that you appoint as your agent through your durable power of attorney will have the authority to handle financial matters that the trustee of your living trust is not authorized to do. Specifically, your trustee is limited to managing or handling the assets that have been transferred into your living trust.
Your agent named in your durable power of attorney will be able to manage assets that cannot be or simply were not transferred to your living trust, such as
- life insurance
- checking accounts
- retirement accounts
- other assets owned outside the trust.
In addition, you can give your agent powers to write checks, collect government benefits, file tax returns, and even handle legal actions on your behalf, all of which are duties that fall outside of the parameters of a trustee’s powers.
What will my agent be authorized to do by my power of attorney?
An agent under a durable power of attorney is granted the power to handle your financial matters for you in the event you are unable to do so yourself. These powers can be fairly broad and you can grant the agent all rights, powers, and discretion to handle any financial matters on your behalf, including the following:
a) Buy, sell, and rent real estate, including collecting rent on properties held in your name;
b) Manage accounts with financial institutions, including writing checks and depositing funds into your accounts;
c) Handle stock transactions, including buying and selling stocks;
d) Buy and sell personal property;
e) Access your safety deposit box;
f) Manage any of your insurance and retirement accounts;
g) Manage any government benefit accounts held in your name;
h) File all your tax returns;
i) Handle any litigation or claims filed against you or file claims and suits on your behalf;
j) Manage any commodities or option transactions;
k) Manage any of your business operations;
l) Handle any transactions on behalf of your estate;
m) Engage in long-term care planning to protect assets for a spouse or family members; and
n) A host of other powers.
This is just a sampling of the rights and powers an agent can have under a durable power of attorney. You do not need to grant all these powers; you can limit the powers you grant your agent.
Can my agent make health care decisions for me?
An agent under a durable power of attorney for financial matters cannot make health care decisions for you. Rather, you will need to execute a separate durable power of attorney pertaining to health care (sometimes called a health care proxy) that will allow an individual whom you appoint as your agent to make medical decisions on your behalf.
Are there any powers my agent cannot be given in a durable power of attorney?
Although your agent may be granted broad powers under your durable power of attorney, certain acts cannot be delegated to your agent. For example, your agent cannot perform personal acts on your behalf, such as drafting or amending your will or living trust.
Your agent cannot vote for you or handle matters pertaining to marriage or divorce. Also, your agent’s duties involve acting in your best interests. Therefore, your agent is not allowed to give away your property to others, unless this power was otherwise specifically granted to him or her.
You must execute a separate durable power of attorney (sometimes called a health care proxy) to give your agent the power to make medical decisions.
What obligations does my agent have to me?
Your agent is obligated to act in your best interests with strict standards of honesty and loyalty. In doing so, your agent is required to ensure that your property is safe and to keep your property separate and apart from his or her own property.
Part of your agent’s responsibility includes keeping detailed and organized records of all the financial transactions made on your behalf.
Whom should I name as my agent?
Because an agent under a durable power of attorney is usually granted broad powers, the person you choose should be someone you trust completely and know will act in your best interests.
You should have absolute faith in the agent’s loyalty, competence, and devotion. You also want to choose someone who is willing to serve. People often select a family member, close friend, or a professional with a reputation for honesty.
Can I name more than one agent?
Yes. You can select more than one person to act as your agent. In doing so, however, you need to decide whether you will grant your agents authority to act individually or only jointly. Pros and cons exist for each method.
Granting your agents power to act individually allows one agent to act quickly on your behalf. On the other hand, requiring your agents act jointly provides a built in safeguard to ensure your agents are acting in your best interests.
A downside of requiring the agents to act jointly is that they could disagree on how to handle the matter, or one may be unavailable, which could cause delays in the action.
Additionally, attorneys often suggest that you name at least two individuals to serve consecutively as your financial agents. Listing two different people ensures that you will have a named agent in place in the event that the first person you named is unable to serve.
When does a durable power of attorney become effective?
A durable power of attorney can be drafted in two different forms.
One form takes effect a soon as you sign the document and remains in effect if you become incapacitated.
The alternative form, known as a “springing durable power of attorney,” does not become effective until you become incapacitated. The document typically includes language that you are incapacitated once a doctor finds you are no longer able to handle your affairs.
Sometimes the springing durable power of attorney is drafted to require two independent doctors to determine that you are unfit to handle your affairs. Remember this is not the same as being declared incompetent by a court of law.
If I execute a durable power of attorney, will I still have control of my property and finances?
Yes. Executing a power of attorney does not eliminate your power and control over your property and finances. The power of attorney is a document that allows you to “share” your power with a person whom you appoint as your agent.
As long as you are still capable of making your own decisions, you can instruct your agent as to what actions he or she can do on your behalf.
When you become unable to make the decisions for yourself, your agent can then handle your financial matters for you.
Can my agent take my money or property without my permission?
Your agent is not supposed to take or use your money without your permission. However, by appointing someone as your agent, you may be giving that individual access to all of your accounts.
A risk does exist that your agent may abuse his or her powers and spend your money or sell your property contrary to your wishes. Therefore, it is important that you choose an individual whom you trust to serve as your agent.
What should I do if I think my agent is misusing my power of attorney?
If you suspect that your agent is abusing his or her powers, you should immediately revoke the power of attorney.
You should also notify all your banks and other financial institutions that you have revoked the power of attorney.
Finally, you also have the option of going to your Probate Court and requesting an accounting of your financial affairs from your agent. To do this, you most likely will have to pay a filing fee to start the action, but then your agent will be forced to provide a detailed accounting of how he or she spent your money.
Can I revoke a durable power of attorney?
Yes. You can revoke a durable power of attorney at any time so long as you are mentally competent to do so.
If the actual document was never given to anyone, you simply need to destroy it. However, if you have provided your agent and any other financial institution a copy of the document, you will need to have another document prepared that revokes your power of attorney.
This document should be acknowledged and witnessed in the same manner as your original power of attorney. Then, you should provide the document revoking your power of attorney to your banks and financial institutions for them to keep on record.
Do I need to execute a new power of attorney if I move to another state?
Laws pertaining to durable powers of attorney vary for each state. Therefore, you should consult an attorney within the new state to ensure that your power of attorney is effective and satisfies the requirements of your new state to make your document enforceable.
Where should I keep my power of attorney?
You should keep your power of attorney with your other estate planning documents. It is important to keep the power of attorney in a safe and secure place that is easily accessible.
You should notify your agents and /or family members of where your document is in case they need to locate it. Also, you should give a copy of your power of attorney to the individual you named as your agent.
You may also want to provide financial institutions with which you have a relationship with a copy of your power of attorney.
If you choose to keep your power of attorney in a safety deposit box, make sure that you arrange with your financial institution for your agent to have access to your safety deposit box.
You should also provide your agent with a key to your safety deposit box.
When should I give my power of attorney to my agent?
You can give a copy of your power of attorney to your agent at any time after you have created the document. However, if the power of attorney is not going to be used immediately, it is best if you keep it in a safe and secure location.
If you choose not to give your agent a copy of your power of attorney at the time you create the document, you should make sure that your agent knows where you keep the document in case he or she needs access to it if you are unable to provide it yourself.
What are the requirements for a valid durable power of attorney?
A durable power of attorney must:
1. Be written.
2. Be signed by the principal.
3. Be notarized or witnessed depending on the type of power of attorney.
4. Designate another person as attorney-in-fact or agent.
5. Contain language to the effect that the agent’s powers will continue after the principal’s incapacity (or will begin upon the principal’s incapacity, if the power is a springing power).
Talk to Attorney Vincent Casiano
If you are interested in making a durable power of attorney, don’t hesitate to consult with Attorney Vincent Casiano. He is experienced in estate planning and the different power of attorneys so he can help you make the best plan for you and your family. Schedule a consultation today!