Various situations arise in life where you are unable to continue or no longer want to manage your own affairs. To be fully prepared for a moment like that, should it present itself, you should have a Power of Attorney in place to act on your behalf.
Giving another person the ability to make life altering decisions on your behalf may seem intimidating, but it is a precaution you should take. Designating someone as Power of Attorney is generally done through a Power of Attorney document, drawn up by an estate planning attorney.
It grants, the person of your choosing as Power of Attorney. This is a very important role and great thought you should go into the person of your choosing, but decisions regarding your Power of Attorney shouldn’t stop there.
1. What do I need to know about Power of Attorney?
There are many different types. All Power of Attorney documents are not created equal. You can limit your Power of Attorney to things such as health care, finances, or property matters. The type of Power of Attorney you choose should depend on what you are trying to accomplish with the document.
Although there are many different types, durable Powers of Attorney, are the most common type of Power of Attorney. They generally take effect as soon as the document is executed. In other words, this Power of Attorney is generally effective both before and after you become incapacitated or otherwise unable to make decisions on your own.
2. What powers do I want to grant my attorney-in-fact?
The powers you grant to your attorney-in-fact is just as important as who you choose.
Do you want that person to step into your shoes and have full control to make any decisions and/or changes to your accounts as he or she sees fit? If so, you are looking for Power of Attorney that grants general powers.
A power can be a “general” power, granting all powers held by the principal or “limited” restricting power to performing only actions specifically listed.
The document can be written to empower the agent now, or to become effective only upon the occurrence of a specific event, such as the principal’s incapacity (sometimes referred to as a “springing” power). A durable power of attorney may save the often-considerable costs of a conservatorship. A conservatorship, however, has the benefit of court supervision.
Indeed, most Power of Attorneys are written this way so that an attorney-in-fact is able to address as many potential issues as possible. After all, the whole purpose is to be able to act on behalf of another. So if a Power of Attorney does not include the appropriate powers, it doesn’t accomplish much.
On the other hand, it’s possible to more narrowly define the powers you grant your attorney-in-fact. Such document often called “limited Powers of Attorney.” For example, you might have a child that you would like to oversee your investment decisions, but you do not want that child to have the power to change the named beneficiaries of your accounts. A limited Power of Attorney document could be drafted in such a situation to help achieve these goals.
Some powers, such as the power to execute and revoke a will, cannot be given to another individual.
2. Will my financial institution honor my own Power of Attorney? Or do I need to use one that they provide?
If a Power of Attorney is part of your overall estate plan, as it should be, then one of the first things you should do is check your financial institutions to see what their policies and procedures are. Even if you have the best estate attorney draft your Power of Attorney document it won’t mean a thing if your financial institutions refuses to honor it.
Here are the three most common policies that financial institutions have in place:
- The institution will have its own Power of Attorney document that must be completed in good order and on file with the institution before your attorney-in-fact will be able to act on your behalf. If you have a customized Power of Attorney that was created by an attorney or other similar document, it will not be accepted.
- The institution will have its own Power of Attorney document, but it will accept customized Power of Attorney documents you have prepared elsewhere. As long as either is submitted in good order and on file with the institution, your attorney-in-fact will be able to act on your behalf.
- The institution will not have its own Power of Attorney document, but will accept customized Power of Attorney documents you have prepared elsewhere. As long as your Power of Attorney is submitted in good order and on file with the institution, your attorney-in-fact will be able to act on your behalf.
Although highly unusual, it’s possible that your financial institution could refuse to accept all forms of Power of Attorney documents.
Being aware of your financial institution’s policies is pertinent to having your estate plan executed the way you want. But it is equally important to know what powers you’re giving to you attorney-in-fact.
Other notables in regards to Power of Attorney:
- You still have power to act
- They do not trump a will
- They are fully revocable
- They cease at death
A Power of Attorney should be part of every estate and financial plan, if you haven’t designated someone as your Power of Attorney, get started today.