What is it? A Power of Attorney is a document that gives another person (your agent) the authority to make legal decisions and transactions on your behalf.
Why do you need it? If an individual loses the capacity to act on his own behalf, then the agent can act for him. If there is no Power of Attorney signed, a Guardianship proceeding will need to be commenced with a Surrogate Court to have a legal guardian appointed – an extremely intrusive, time consuming, and expensive procedure. Every adult above 18 years of age should have this document signed.
Who should be named as my agent? Often, spouses name each other as their primary agents. If you have adult children, then one or more of the children can be named as successor agents. If there are no adult children, then a competent parent, relative or a friend can be named as the agent. You can name more than 1 person to be your simultaneous agents, and specify whether or not you want them to act together or separate. The most important consideration is to name someone that you can trust.
When does it become effective? A durable Power of Attorney becomes effective immediate upon signing. Often, since the document is done as part of the overall planning, the document is signed but retained by the principal. together with other estate planning document. This way, only if the principal loses capacity, will his agent get the document and use it.
What kind of powers does my agent have over my affairs? You have the ability to control that issue. The statutory form has a list of powers that you may grant to your agent. A competent attorney will have a form that will have additional powers. The most effective Power of Attorney is the one that grants the broadest powers, because one cannot anticipate the future. However, if you are uncomfortable with granting your agent all of the powers, you can specify which ones you want to give (i.e. banking and real estate, but not trusts). The Power of Attorney is a very important document, one that gives someone else the potential control over your financial life, that is why it is very important to sign it in front of a competent attorney who can explain the implications of various provisions.
What can the Power of Attorney NOT be used for? The Power of Attorney cannot be used to make health care Decisions on your behalf. In order to designate a health care agent, you need to sign a Health Care Proxy.
When does the Power of Attorney expire? There are 2 ways for the document to expire. First, you can revoke your Power of Attorney at any point in your life, as long as you have the mental capacity to do so. Second, the Power of Attorney expires immediately upon your death. Just like one cannot make legal transactions after death, your agent loses his capacity to act on your behalf as well.
Is the document subject to abuse? Absolutely. By signing the document, you are giving someone else the access to your financial accounts and real estate. That is why your agent should be someone that you trust to act in your best interests.
Disclaimer: This article only offers general information. Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions. As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.