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Power of Attorney

I hope that all my readers are having a great holiday season.  As I have mentioned in previous posts, estate planning has become a newfound passion of mine.  Even on a personal level, it is important that my own family have in place the proper documentation.  In my opinion, careful estate planning is the best gift that you can give your family members who will have to take care of you and your estate when the time comes.  Stop pushing these tasks for later– make 2010 the year that you look at your own estate planning documentation and make sure everything is up-to-date.

Perhaps the most basic document that everybody should have is a Power of Attorney (“POA”).  It is a very simple document that gives the agent(s) (a.ka. “attorney-in-fact”) the authority to act as the principal’s fiduciary when the principal has a diminished mental capacity, out of the United States, or unable to care for his/her financial affairs.  Contrary to the name, the agent does not have to be licensed attorney and is typically a trusted family member.

A POA does not replace a health proxy.  A POA does not give the agent the ability to make medical decisions for the principal; instead, POA’s give the agent the ability to the care of agent’s property (including real estate, bank accounts, bonds, stocks, safe deposit boxes, taxes, retirement plans, social security, insurance, pets and service animals) and conduct business transactions.  POA’s can be tailored for specific situations.

There are three types of Power of Attorneys:  1) Durable, 2) Limited, and 3) Springing.  A durable power of attorney is effective immediately whereas a limited power of attorney (as the name suggests) is only effective for a certain period of time (e.g., real estate transaction, when principal is backpacking Europe).  Interestingly, a springing power of attorney is effective only after some stated event (e.g., disability).

Revocation. A POA can be revoked anytime by the principal (unless the principal does not have adequate capacity).  Therefore, POA’s should be revoked and amended with life-changing events like marriage, divorce, where agent(s) predecease you, or other circumstances when a POA amendment may be appropriate (such as broadening or narrowing the powers given to the agent).

New Power of Attorney Form in New York.  This past September, New York implemented a new durable statutory Power of Attorney form that contains broader powers than previous POA forms in New York.  As a caveat, anyone executing the new POA form in New York revokes all prior POA’s.  Ellen Victor (@EllenVictor on Twitter), an estate planning attorney in Long Island, New York wrote an informative blog on the topic here.  In addition, some more information from Wall Street law firms in Manhattan can be found here and here.

As a warning, though a Power of Attorney is a fairly straightforward document, nonlawyers should be cautious when completing a POA form without consulting the opinion of a licensed attorney because of the broad powers that it gives.  It is paramount that principals understand the breadth of powers they are giving to the agent(s) and when that agent(s) will have the power of attorney.  With all of that being said, stop postponing the task and make 2010 the year that you get/amend your power of attorney.

"This blog is for informational purposes only and is not intended to create an attorney-client relationship. It is recommended that you speak to an attorney licensed in your jurisdiction before relying on the information in this blog."

0 Responses to Power of Attorney

  1. Good thread. Cheers!!

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