Without a doubt, a Last Will and Testament is the most commonly used, and universally recognized, estate planning document. A power of attorney, however, come in a close second. Few people make it through their lifetime without executing a power of attorney and/or being named as an Agent under someone else’s power of attorney. While a power of attorney, or POA, can be an extremely effective estate planning tool, it is imperative that you understand what a POA does, and does not, accomplish as well as the extent of the power and authority conveyed in a POA agreement. You should also have a firm understanding of the different types of POAs as well as when and why you might want to use something other than a blanket POA agreement. For example, do you know the difference between a durable power of attorney and a traditional power of attorney? When and why would you want to use a durable power of attorney? As is always the case, it is best to consult with your New York estate planning attorney before making any decisions regarding your estate plan; however, gaining some additional knowledge regarding the use of a durable POA may also be beneficial to you in the future.
What Is a Power of Attorney?
A power of attorney is a legal agreement whereby a Principal (the person who executed the POA) grants power to someone else (known as the “Agent”) to act on behalf of the Principal in legal matters. The type, duration, and extent of the authority the Principal grants to the Agent will depend on the type of POA executed.
General vs. Limited POA
There are two basic categories of POAs – general and specific. A general power of attorney grants very broad authority to the Agent. In essence, when you give someone your general power of attorney it means that the individual steps into your shoes and becomes you, for the purpose of exercising legal authority. Typically, the only limit to the way in which an Agent may use the authority granted under a general POA is statutory. Most states have a power of attorney statute that enumerates certain power or authority that cannot be granted to an Agent, even under a general POA.
A “specific” power of attorney, also referred to as a “limited power of attorney” operates under the same basic concepts as a general POA except that it only grants specific authority or power to the Agent.
The Durable Power of Attorney
A traditional power of attorney would automatically terminate upon the death or incapacity of the Principal. Clearly, you want the authority you conveyed to your Agent to end when you die; however, do you want that authority to end if you become incapacitated? For many people, the answer is “no.” In fact, for many people the entire point of creating a POA is to ensure that a spouse or other chosen loved one is the person who will have control over their assets should they be in a position where they cannot control them as a result of incapacity. With this in mind, the “durable” power of attorney evolved. A durable power of attorney is simply any POA wherein the Agent’s authority survives the incapacity of the Principal.
When Would a Durable Power of Attorney Be Preferable?
Any POA can be made durable. The question to ask yourself when deciding if you want the POA you create and execute to be a durable POA is “If I am incapacitated, do I want the Agent to still be able to use his/her authority?” Obviously, if you are incapacitated it means that you will be unable to revoke the authority you granted under the POA. For this reason, you need to be certain that you have absolute trust in the Agent and/or that the power you conveyed in the POA is minimal because your Agent will potentially be able to exercise that authority during a time when you will be unable to do anything about it.
For more information, please download our FREE estate planning worksheet. If you have questions or concerns relating to a durable power of attorney, contact the experienced estate planning attorneys at the Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.