Almost everyone considers doing a Will or Trust at some time in their lives. Usually, the topic comes up when something significant happens, i.e., the birth of a child, planning for a long trip, or after a divorce. Arguably, the next most important part of your estate plan should be your power of attorney.
What is a power of attorney?
A power of attorney (POA) is a legal document that allows another person, your “agent”, to act on your behalf with regard to your financial affairs. The POA allows you to choose which particular powers you give to your agent and which you do not.
Who should I pick as my agent?
People generally choose their spouse or a trusted family member or friend. You may also choose a successor agent if your first agent is unavailable. You may also pick more than one agent to act at one time. If you do pick more than one agent, you must choose if they can act independently or not.
Why is having a POA important?
If your POA is “durable”, it will allow your agent to handle your affairs in the event you are no longer able to do so due to accident, illness, or other cause. If you become incapacitated and don’t have a POA, someone may need to be appointed as a guardian of your property by a court. The guardianship proceeding could be complex and contentious, and it may result in the appointment of someone you would not prefer as your guardian.
Can I do my own POA by using an on-line form?
You can, but you run potentially serious risks by doing so. The POA statutory form is a somewhat complex and lengthy document, which presents the signer with multiple choices regarding who to name as agent, what powers to give to the agent, and whether to allow significant gifting authority through a statutory gifts rider. Improper execution or inappropriate choices on the POA can lead to significant legal problems when the POA is later needed.
What is a statutory gifts rider?
A statutory gifts rider (SGR) allows your agent to make potentially significant gifts of your property to themselves and to others. It is an optional rider to the statutory power of attorney form. In the absence of the SGR, your agent is limited to gifts of no more than $500 per year to certain people and entities.
What is the benefit of doing a SGR?
The SGR will allow your agent to make gifts to themselves and to others that may be advisable for tax planning or Medicaid planning purposes. For example, it would allow a wife to transfer her husband’s half of their home to herself. This is advisable if the husband is applying for Medicaid to pay for a nursing home, because the home is an exempt asset if wholly owned by a wife who continues to use it as her residence.
Can I revoke my POA?
POAs are revocable at any time. You should seek legal assistance to make your revocation effective, because a financial institution may still honor your POA if they haven’t received proper notice of its revocation. If there is any doubt about your agent accepting the revocation, it is advisable to have a professional process server deliver the revocation to them. In that fashion, it will be very difficult for the agent to claim they did not receive it.
Does my agent have to sign the POA?
Yes, for the agent to have the ability to act, they must also sign the POA. The agent’s signature is an acknowledgment that they understand that they have a fiduciary duty to you and must act in your best interest. It also means they understand they will be legally liable in the event they violate their fiduciary duty.
I have a POA from ten years ago—is it still valid?
As long as the POA was properly executed on a valid form at the time, the POA is still valid today. You should consider doing a new POA, however, because the statutory form changed in September 2010, and the new form is most recognized by financial institutions.
What if I don’t have a POA?
If you don’t have a POA, you should consider seeking the services of an experienced estate planning attorney to draft a POA for you. The attorney can also oversee the execution of the POA to ensure the document is signed properly by all necessary parties and that you’ve made choices in the POA which are consistent with your overall estate plan.
Matthew J. Dorsey, Esq. is a Partner with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, This email address is being protected from spambots. You need JavaScript enabled to view it., and www.oalaw.com.
