How A Power of Attorney Functions in Estate Planning

“How A Power of Attorney Functions in Estate Planning”

from KamenskyuCohen & Associates

by Franklyn Aronson, Esq.

A Power of Attorney (POA) is a legal document giving another person or institution the right to do certain legal acts or tasks for another person (the Principal).  This document may be one of the most important in an Estate Planning.  It will save significant time and money if circumstances necessitate its use.  A person giving another Power of Attorney can make it very broad (General POA) or can limit it to certain acts ( Limited POA).

The person giving another a Power of Attorney does not surrender his or her rights.  It simply authorizes another to act on his or her behalf, much like giving another person an extra set of keys to your house; you, of course, still maintain the access to your house yourself and you can take back the key or change the locks if you choose. 

A “General” Power of Attorney gives your agent very broad powers to do almost every legal act that you can do.  The document will list numerous authorizations and then contain a general catch-all authorization for the person with the Power of Attorney to perform acts for you.  It will include financial, health and property management powers.  A “Limited” Power of Attorney gives the agent only certain powers or rights to engage in a particular transaction on your behalf, such as signing financial documents on your behalf if, say, you cannot be present at a house closing. 

A “Durable” Power of Attorney comes into play if what you want to accomplish is having someone act on your behalf should you become incompetent. Because an illness or accident causing incapacitation is when people most need a Power of Attorney acting on their behalf, the Durable Power of Attorney is probably the one most important in Estate Planning. It allows your Power of Attorney agent to make decisions about your health, finances, sign checks, documents and act as your agent in all legal transactions.  The only thing that distinguishes a “Durable” Power of Attorney from a “General” Power of Attorney is the language that states that the power survives the principal’s incapacity.

State statutes require that you must be competent at the time you sign a Power of Attorney.  Further, you must fully understand the document you are signing at the moment of execution and it must be signed in the presence of witnesses and properly notarized.  The document terminates when you, the Principal, dies, or when you, the Principal, revokes the Power of Attorney, or when the court decides that the POA should be revoked.  A Power of Attorney document is not a Will nor can someone who has Power of Attorney make a Will (nor a codicil to change an existing Will) for the Principal.  Since all Powers of Attorney end upon the Principal’s death, any desires on the part of the Principal as to the distribution of his or her possessions, monies and/or properties need to be made by that Principal in separate documentation such as a Will or Trusts.  An agent under a  Power of Attorney can transfer assets to a trust that the Principal has already created, but only if the Principal has designated that as one of the Powers of Attorney in the POA document.

For more information on Powers of Attorney and other Estate Planning issues, contact the Law Offices of KamenskyuCohen.  Www.info@kc-law.net.