When you sit down with an attorney to go through the fundamentals of the estate planning process, one of the questions you will almost certainly be faced with is this: who would you like to designate as your power of attorney. You may be unfamiliar with this legal document and wondering, “What the heck is a power of attorney, anyway?”
Many people have questions about choosing a power of attorney and what it means, what it entails, and who you could or should designate. To help you start thinking ahead, we have answered some of the most frequently asked questions about power of attorney below.
Like everything else in the world of estate planning, there are a lot of nuances and intricacies to this legal document. If you have specific questions about your unique situation, it is best to speak with an experienced estate attorney who can walk you through your options.
What Is A Power of Attorney?
Power of attorney is a legal document that is a staple of estate planning. Essentially, you are designating someone you trust to act on your behalf and handle financial matters for you. These powers are typically, but not necessarily, deployed when a person becomes incapacitated and cannot act on their own behalf. The ‘power’ is also often used when it becomes more difficult for someone to manage their own affairs.
There is more than one type of power of attorney, so it can be instructive to go through the differences and the various scenarios in which they may be necessary. The most common form is a durable power of attorney, which would not be affected by physical or mental incapacity and gives the POA authority to continue to carry out the fiduciary responsibilities granted in the document. This is in contrast to non-durable general power of attorneys, which are rescinded upon incapacitation.
There also exist limited or special power of attorneys that give the agent the ability to carry out a specific task, such as selling a home, or to serve for a limited period of time, such as at a time when you will be out of the country.
A health care power of attorney is another document, similar to a living will, that grants an agent the authority to make medical decisions. For the purposes of this article, we are focusing on power of attorneys that are geared towards financial matters.
What Your POA Can Do
It’s important to choose someone you trust, someone who has only your best interests at heart because they actually do have quite a bit of power. A POA can open and close bank accounts, write checks, and pay bills. They can file taxes on your behalf, manage or sell properties, and apply for public benefits, such as Medicaid. A POA can also make decisions about investments, life insurance policies, and business transactions. They can also make financial gifts and funeral pre-arrangements on your behalf.
What Your POA Cannot Do
Though they may have been granted broad authority, there are many things a POA cannot do for you. They cannot vote in a public election. They are unable to make changes to a last will and testament, and they cannot assign another person to assume the responsibility of power of attorney for them.
It’s also important to note that even in the case of durable power of attorney, any and all authority is rescinded at the time of death. It’s not uncommon that the power of attorney and executor of the will are the same person, but it’s also not a given.
Who Can Be A POA?
Choosing someone to act on your behalf is a decision not to be taken lightly. While many people choose a spouse, sibling, or adult child, a POA need not be a relative. It does need to be a person who is at least 18 years of age or a financial institution that has a place of business in Florida and has legal authorization to conduct trust business.
Regardless of who you choose, it’s critical to communicate with them. First, let them know that you have named them as your power of attorney so that there are no surprises, and they are able to leap into action should a need arise. Secondly, make your wishes known regarding how you would want your financial affairs handled. They should be made aware of your financial situation, what properties need to be maintained, what bills will need to be paid, any debts that will need to be collected, etc.
It would also be prudent to share with your power of attorney what their legal obligation is. An agent must act within the scope of the powers granted to them, and they must act in good faith. Should they not perform their responsibilities in your best interest, there may be legal and financial ramifications.
Do I Need a POA?
It is a wise choice to designate a POA while you have the capacity to do so. Most importantly, it allows you to choose a person that you trust. Should you become incapacitated without a durable power of attorney in place, a guardian would need to be court-appointed. The process can be time-consuming and eliminates your opportunity to speak for yourself.
Another benefit of having a power of attorney is sheer convenience. When mobility is an issue, empowering a spouse or adult child to conduct business and run financial errands on your behalf can be tremendously helpful.
If you have additional questions we have not answered – or if you’d like to work with a professional estate planning attorney to draw up this critical legal document, contact us. Our attorneys know that every family is different, and we take the time to understand yours. We believe the details matter, and we ensure that you walk away from the conversation feeling confident, empowered, and comfortable with the decisions you’ve made.