A power of attorney is an important lifetime planning tool. A power of attorney is a document that gives a person the power to act on your behalf under circumstances you designate during your lifetime. These circumstances often include if you become unable to act on your own behalf because of illness or incapacity. Other circumstances include granting specific authority to conduct your affairs while you are traveling abroad. The power may be limited or temporary, such as granting an individual the power to pay your bills. Alternatively, the power may be general or permanent, granting an individual the power to carry out all your financial affairs.
As part of an estate plan, an individual may execute what is called a durable power of attorney that may take effect in the event you become unable to act on your own behalf due to mental or physical disability caused by the effects of aging or illness. By having a durable power of attorney in place, you and your loved ones can avoid going through a court proceeding to appoint a conservator to act on your behalf. If the court appoints a conservator, you will not have the opportunity to decide who that individual will be and the court proceeding is a matter of public record.
The person you name in the power of attorney to act on your behalf may only take those actions permitted in the document. Thus, the power of attorney can be tailored to your specific circumstances and wishes. For example, if the power of attorney authorizes the person to pay your bills and manage your investments, the agent may carry out those actions. However, other actions excluded from the power of attorney would not be permissible. For example, some individuals may grant their agent the power to make gifts to individuals or charities, while other individuals may exclude from the power of attorney the power to make gifts.
Durable powers of attorney stay in effect until revoked. Thus, if you have a power of attorney and later wish to revoke it, you may do so, provided you have the mental capacity to do so. Usually, to revoke a power of attorney, you must give written notice to the person named to act on your behalf. If you do not revoke the power of attorney, the power expires upon death. Thus, the power of attorney is only effective during life. Upon death, a will or trust will govern the management of your affairs and the distribution of your estate.
Choosing someone you wish to act on your behalf and deciding what authority you wish to give to that person are important considerations. You will want to choose someone you trust to act on your behalf and who is capable of carrying out your financial affairs with integrity. Often, individuals appoint their spouse or an adult child. Other times, individuals appoint a trusted advisor or friend. In addition to deciding who to appoint, you will work with your estate planning attorney to determine the scope of authority you wish to grant so that the authority is consistent with your needs, values, and your estate planning objectives.
Please contact us for a free initial consultation if you need to plan your estate or update an existing estate plan.