Planning For Incapacity With A Power Of Attorney
A power of attorney is a document where a principal (you) give your agent (someone else) the ability to make a variety of decisions on your behalf, as if you were doing it yourself. It is a very important document every person should have regardless of how much money you have in the bank. As a principal, you should only give this power to someone whom you trust implicitly.
What Does The Power Of Attorney Do?
A general durable power of attorney gives your agent the right to make decisions on your behalf regarding business and financial affairs, real estate matters, some health care decisions and personal affairs. The power given can be as simple as permitting your agent to write and/or sign checks for you and can be as complex as changing insurance or retirement plan beneficiaries on your accounts. An agent can sell, buy or gift things away on your behalf. Many think you have to be incapacitated for your agent to use a power of attorney. This is generally not true. Rather, your agent can use your general durable power of attorney to do things even if you are completely healthy and competent.
Of course, you can place limitations on a general durable power of attorney, like not permitting your agent to conduct certain transactions. Your agent also has to sign an acknowledgement page stating he or she will only conduct your affairs in your best interests and will not co-mingle your funds with his/her’s. These documents can be very convenient if you need your spouse/agent to sign a document for you or you want your daughter/agent to attend a real estate closing on your behalf because you are stuck on a business trip.
A limited power of attorney only gives your agent limited abilities. Typically, an agent in these situations may only have the power to sign a document for a single transaction because you are unable to or unavailable for whatever reason.
A springing power of attorney is similar to a general durable power of attorney except that your agent may only act if a certain condition or event occurs. For instance, some clients only want a power of attorney to be valid if he or she is deemed incapacitated. Typically, a springing power of attorney needs to be accompanied by several written and notarized letters from the principal’s physicians stating that the principal is incapacitated, in order for the agent to act.
Of course, there are advantages and disadvantages to this document. One advantage is that no one can act on your behalf unless you are incapacitated, thereby alleviating any fear of misuse by an agent. A disadvantage is that it often takes time to obtain those physician letters if your agent needs to make a decision or act on an urgent matter.
Recent changes in the law have made certain duties carried out by agents mandatory, regardless of the type of power of attorney you choose. Under the new law, effective January 1, 2015, agents always must act in good faith, in your best interests, within your reasonable expectations and only within the scope of authority granted by you in the power of attorney.
How Do I Get Started?
The Pittsburgh estate planning attorneys at McMorrow Law, LLC, offer a free consultation to discuss your estate planning goals and can answer questions regarding powers of attorney. If you need a review of an existing power of attorney document or want to create a new one, please contact our experienced power of attorney lawyers at 724-940-0100 | 724-940-0100.