Stephanie Fierro 0000-00-00 00:00:00
Powers of Attorney – You’re Not Dead Yet Most people associate the phrase “estate planning” with post-mortem planning. But a properly prepared estate plan does not just manage your affairs in the event of your death. Powers of attorney, an integral part of any estate plan have no post-mortem effect (with limited exceptions). It is said that powers of attorney die with you. Every now and then a client will joke that they don’t care how their assets are divided in their will or trust because, after all, “I’ll be dead.” It is usually a welcome bit of levity during an otherwise serious process. But what if you’re not dead? Experience teaches us that old age, serious illness and traumatic events don’t always result in immediate death. So what happens if you are living but are temporarily or permanently incapacitated? If you think about it, powers of attorney may be the most important part of your estate plan because they affect YOU – while you’re still living. A power of attorney grants legal rights and powers from you, the principal, to your third party designated agent. That agent (usually a family member or close friend) then has the authority to manage your personal affairs for whatever time period you designate. By granting someone permission to act on your behalf, you limit confusion regarding your desires and streamline the process of managing your affairs. Consequently, having a properly executed power of attorney can save you and your loved ones a significant amount of anxiety, time and expense. Without a valid power of attorney, your loved ones will need to seek permission from a court to act on your behalf. Absent that permission, your loved ones cannot manage your affairs. So the failure to prepare one or more powers of attorney can dramatically increase both the financial and emotional cost of an incapacitating event. All powers of attorney fall into one of two categories: (1) ones that manage property, or (2) ones that manage personal care. The former is typically referred to as a financial power of attorney while the latter is referred to as a healthcare power of attorney. In most cases the powers are intentionally broad so that each document can work under a lot of different circumstances. But you can narrow the scope of authority simply by customizing the document to suit your needs. Regardless of the type of power you are looking to create, the significance of this agency relationship should not be taken lightly. What should be your key considerations? Agent Position Available - Must be willing and able to serve, trustworthy and a self-starter: First, remember that the person you designate as your agent will be granted a lot of authority over your affairs. Your agent essentially steps into your shoes to manage your life the same way you could. For purposes of illustration, your financial agent can withdraw money, transfer funds, pay bills, cash checks, and manage accounts and investments while your healthcare agent may be consulted by your physicians to determine whether you would allow or refuse certain healthcare treatment, or whether you wish to donate your organs. This list is not exhaustive; an agent with broad powers can do almost whatever you could do. There is little if any external supervision regarding these affairs, so the person designated as your agent should be someone you trust implicitly without reservation. When deciding whom to name, keep in mind that your agent must be willing and able to serve in that role. Your nominee may not be available when called upon for any number of reasons, e.g. his own incapacity, death, or simply an unwillingness to serve. At the end of the day, he or she cannot be forced to serve. So I invariably recommend nominating alternate agents. I also recommend speaking with the people you plan to designate to determine whether he or she is willing to serve as your agent. Agent Will Be Responsible For: Second, the agent will be responsible for running your life. Most people will grant their agent the authority to perform essentially all of the tasks they currently manage and, in most cases, we recommend that. Still you have the right to limit your agent’s role as you see fit. It is, however, important to remember that although you are giving your agent a significant amount of authority over your affairs, your agent must act on your behalf and in your best interest. A broad grant of authority can prove very helpful when, for example, an incapacitated principal implemented an estate-planning strategy that includes lifetime gifting. If your agent has proper authority, he or she can continue making gifts on your behalf under that plan. Agent’s Start and End Dates: Third, the power of attorney can be effective immediately or at some later date upon the occurrence of a specified event. In my experience, the broader the grant of authority, the less likely the principal will make the document effective immediately. The vast majority of the time, powers of attorney are drafted as a “springing” power, effective only upon the principal’s incapacity. In the case of a springing power of attorney, the principal’s incapacity may only be temporary. In those cases, the agent’s role terminates when the principal regains capacity. If the power of attorney is effective immediately, it may terminate on a specified date or when the principal revokes the power of attorney. Otherwise, the agent’s role customarily terminates upon the death of the principal. Parting Thoughts for the Principal: Estate planning is a fairly altruistic concept; the benefits of your plan are devoted almost entirely to those you leave behind. Powers of attorney are not so different. They provide much needed guidance regarding your wishes – giving ultimate power to those in the position of having to make decisions for you. But, if altruism isn’t your thing, this is your opportunity to look out for yourself and make sure you are cared for the way you would if you were able.
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