WHAT is a Power of Attorney and WHEN would I need one?
April 15, 2015 - Posted by: admin - In category:
Like any tool or instrument, a Power of Attorney can be very useful. However, like any tool or instrument, a Power of Attorney can also be used incorrectly.
In our last post, we focused on Pour Over Will basics, including the fact that Pour Over Wills are often used as part of a comprehensive estate plan that centers around a revocable living trust. We noted that even with a Trust, a Pour Over Will is a good safety precaution, to be used in the event there is a stray asset (i.e. an asset not legally connected to the Trust) and the death of the asset owner. We also noted that a Will is legally operative only upon the death of the Will-maker. So what about a situation where we have a stray asset and disability of the asset owner? Great question. In that case, the Pour Over Will would not be helpful. That is a situation where we would look to use a properly drafted Power of Attorney.
A Power of Attorney is a legal instrument that you would use to give authorization to another person to act in your name with regard to your property. If you sign a general Power of Attorney and appoint me as your “agent” or “attorney in fact” under such Power of Attorney, I then have the legal authority to act in your name according to the parameters set forth in the Power of Attorney. A Power of Attorney can be very broad in scope (i.e. covering all assets and giving very general authority) or it can be very narrow and limited in scope (i.e. giving authority over 1 asset or account and for a limited time period). Most of the internet forms and other “do it yourself” forms are broad and general and therefore can be subject to problems and unintended consequences. These are often the means whereby dishonorable children or others steal money or other assets from parents–you know, those horror stories you hear about in the news.
In any event, we use Power of Attorney in most of our estate plans to provide a mechanism to access and distribute stray assets in the event of disability. We draft Powers of Attorney differently, depending on the situation of the clients. Rarely will we give a “current” or “active” Power of Attorney to a non-spouse. Rather, we most often will draft the Power of Attorney to be a “springing” Power of Attorney that will become active only in the event of the disability of the maker of the Power of Attorney. In addition, we most often will give such a Power of Attorney to a child or other non-spouse only in the event of BOTH disability and absence of the other spouse (if applicable). By following these simple guidelines, we can do much to prevent abuses and problems through a misused Power of Attorney.
Again, despite the horror stories you hear about in the news related to misused Powers of Attorney, these can be very and useful tools. Just as a knife can be both very helpful and also very dangerous if misused, so it is with Powers of Attorney. Sometimes that people fail to appreciate the potential dangers of misused Powers of Attorney, since a stack of papers does not seem to be all that threatening (compared to a large and sharp knife). But again, with proper legal counsel, a Power of Attorney can be very useful and helpful.