One of the most commonly used, yet also commonly misunderstood, estate planning tools is a power of attorney. When used correctly and appropriately, a power of attorney can be a power and effective tool; however, when used incorrectly and inappropriately it can wreak havoc on your estate plan. The best way to ensure that any tool or strategy is right for your estate plan is to consult with your New York State estate planning attorney before you consider adding it to your plan. Knowledge is power though, and understanding the different types of power of attorney available may be of benefit to you when you do finally sit down with your attorney to discuss your estate plan.
What Is a Power of Attorney?
At its most basic, a power of attorney is a legal arrangement whereby a “Principal” (the person granting the authority) grants authority to an “Agent” (the person to whom the authority is granted) to act on behalf of the Principal in legal matters. The type, extent, and duration of the authority granted in the power of attorney, or POA, depends on what type of POA is executed.
How Much Power Should You Grant?
There are two basic categories into which a power of attorney must fit – general and limited, or specific. A general POA grants the Agent almost unlimited authority to act on behalf of the Principal. If you grant someone a general POA that individual can do things such as withdraw funds from your bank account, enter into a contract in your name, and even sell assets owned by you. Make sure you have absolute trust in the Agent if you do decide to grant him/her general power of attorney authority.
A limited, or specific, power of attorney only grants the Agent the authority enumerated in the POA agreement. The Agents authority could be limited in type, scope, and/or duration. For example, if you are currently selling your home and plan to be out of town for an extended period of time you might grant someone a limited POA to represent you at the closing.
What Is a “Durable” Power of Attorney?
Traditionally, the authority granted to an Agent terminated upon the death or incapacity of the Principal. For many people, however, their own incapacity is precisely when they want a POA to work. With that in mind, the “durable” power of attorney evolved. A durable POA survives the incapacity of the Principal. Today, some states presume that a power of attorney is durable unless the documents specifically states that it is not durable. Other states, however, require a POA agreement to specifically say that it is durable and the absence of such language makes the POA not durable.
What Is a “Springing” Power of Attorney?
Sometimes, you might want to grant someone power of attorney but only if a specific event occurs that justifies the POA authority. To do that, you may be able to execute a “springing” power of attorney. Though not allowed in all states, in states that do recognize a springing power of attorney it works by including language describing a “triggering” event, such as the incapacity of the Principal or the sale of a home. The POA remains inactive unless, and until, the triggering event occurs at which point the POA “springs” into action and the Agent’s authority activates.
Does a Power of Attorney Work for Health Care Decisions?
One of the most common reasons people want a power of attorney is to give someone the legal authority to make health care decisions for them if they are unable to make them. The problem with that is that in many states even the authority of a general POA does not extend to making health care decisions for the Principal. In the State of New York, for example, if you want to give an Agent the power to make health care related decisions for you in the event of your own incapacity you need to execute an advanced directive known as a “Health Care Proxy.” A Health Care Proxy will grant an Agent the legal right to make health care decisions for you if you are unable to make decisions for yourself.
If you have additional questions or concerns regarding which type of power of attorney is right for you, please join us for one of our free estate planning seminars, or contact the experienced New York estate planning attorneys at The Law Offices of Kobrick & Moccia by calling 800-295-1917 to schedule your appointment.
Latest posts by Anthony Moccia (see all)
- Beneficiary Designations, etc., Aren’t a True Substitute for a Trust - March 19, 2019
- New Tax Proposals - March 14, 2019
- State Income Taxation of Nongrantor Trusts - March 12, 2019