A Power of Attorney (“POA”) is a very useful and inexpensive document to obtain. If you do not have a POA, in order for your spouse or loved ones to make financial decisions for you, they must institute a guardianship proceeding. The question isn’t whether you should have a POA… you definitely should. The question is whether you should have a Durable POA or a Traditional POA.
There are two kinds of POAs.
- A traditional POA is only effective in the event of incapacity.
- A Durable POA is effective as soon as you sign it.
Your choice of POA will be dependent upon your relationship with the attorney-in-fact (the Agent that you name). For example, you might exercise a Durable POA in favor of your spouse, but a traditional one in favor of a friend.
The problem with a traditional POA is that you MUST prove incapacity before it can be utilized. Proving incapacity can be very time consuming and very difficult to do… especially if you don’t have authority to speak with the doctors.
Many people are concerned that if they sign a Durable POA, their Agent will immediately control their finances. There is actually a very simple method for preventing this. Don’t give the Agent the POA. Have a trusted third party hold on to the POA so that the Agent can only use it if they go through that trusteed third party first. The bigger issue of course is that if you are truly worried about the person stealing your assets, you really should not be naming them as an Agent.
Should you hire an attorney to prepare a POA?
If you are planning to buy a POA from the internet, just remember, you get what you pay for. Some of the software is missing vital components such as having the power to make gifts on your behalf. The power to gift is essential if you wish to provide for your spouse or your heirs, particularly if you wish to engage in tax or Medicaid planning. Absent this power, your attorney-in-fact may only use your money for your benefit.
Lawyers typically do not charge very much for these documents. The greatest benefit of working with a seasoned Wills, Trusts & Estates attorney is the experience they have assisting clients with unique situations. For example, the estate planning attorneys at The Pollock Firm LLC have worked with many clients who have children from a prior relationship, assets in multiple jurisdictions, business interests, and delicate family dynamics.
Attorneys can also assist if a Bank refuses to honor a financial power of attorney. Luckily, I have not heard of as many cases regarding this issue during Covid.
Naming Agents Jointly
One of the trickiest questions is whether you should name two people jointly. There are actually two options in this situation. You can name them “jointly and only jointly” or “jointly or separately”.
In my opinion, naming your Agents to act jointly or separately is better if you want either of your agents to act. Frequently people will name more their children in this manner. Having two people together jointly and only jointly allows for more oversight, but it can slow down the ability of the Agents to act quickly.
Special POA rules for Florida
In some states, like Florida, only Durable POAs are valid. This obviously makes the choice of which one you want easier. However, it is definitely something to remember if you have a traditional POA and you move to Florida.
Remember, to save time, money and countless hours of aggravation, a POA must be in place BEFORE you become incapacitated.