Power of Attorney: Part of a Successful Estate Plan

A power of attorney (POA) allows you (principal) to name another or others (agents) to manage your assets along with you. A power of attorney also survives your incapacity. If you become incapable of managing your assets, your agent(s) may continue to do so.

Durable vs. "Springing" Power of Attorney

There are two types of POAs, a durable and a springing. A durable power of attorney goes into effect upon signing by both principal and agent. A springing power “springs” into effect when conditions indicating the principal’s incapacity occur. A durable power is generally the preferred one, but if you want to be sure no one can act while you are capable, a springing is the better choice.

Multpile Agents

The principal may name one or more agents. if more then one is named, then the principal must chose whether they may act individually or must act together

Agent Powers

The agent has only the powers the principal chooses. These may range from the simple, check writing, to the complex, establishing trusts. If the principal wants to allow the agents to make gifts of his/her property in excess of $500, a separate gift rider must be attached to the power of attorney.

Principal's Interests

The agent is a fiduciary. He or she must act in the principal’s best interests. The agent is fully accountable to the principal, while the principal is competent. If the principal wishes, he or she may name a monitor to keep watch over the agent.

There are other mechanisms, a person may chose in order to allow access to his/her money.

Joint Banking

Joint banking means that two or more names are on an account. This is easy to set up, but a power of attorney has distinct advantages. An agent may act only according to the terms of the document and in the principal’s best interests. A joint account holder has equal right to the funds. He or she may use them as he or she sees fit, even if not in accordance with the other’s best interests. A power of attorney terminates at the principal’s death. All accounts are frozen and distributed as part of the principal’s estate. The terms of the principal’s will control. Should the principal not have a will, then state law determines distributions. Funds in a joint account belong to the other account holder. He or she need not share with other heirs.

Trust

The second mechanism is a trust. A trust is more complex to set up. If assets are not titled , so that they are owned by the trust, then the trustee may not manage them. An agent may manage any assets, no matter how titled, simply by signing his/her name as agent. A trust also terminates upon the principal’s death, but the trust may on its own terms distribute the assets.

Choosing an Agent(s)

Before, signing a power of attorney, consider the choice of agent extremely carefully. The document is effective immediately. It can be changed, but doing so is complicated. Being an agent is a responsibility, not an honor. Do not chose any one, including your spouse because it is natural or seems fair.

Factors to Consider

Are your basic values as they involve money similar, how finically secure is the potential agent? Does he or she have the level of expertise that you require or know who can provide that expertise? Make sure he or she is willing and able to serve.

Naming More than One Agent

In considering, whether to name more then one agent and how they should be allow to act, consider whether their relationship is cooperative or competitive. Do not just name all of your children to be “fair”.

If You are Selected as an Agent

If you are asked to serve, consider all of the above before accepting. Once you accept responsibility, you are bound to it.

Talk to a Local Attorney for Advice

A power of attorney can be an important part of your estate plan. It should be tailored to suit you. Be sure to consult with an attorney who specializes in elder law or estate planning before preparing one.

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