Your estate plan may include a power of attorney for property that appoints another person to manage your investments, pay your bills, file your tax returns, and otherwise handle your property if you are unable to do so. But not all powers of attorney are created equal. Thus, it is a good idea to periodically review your power of attorney with your advisor to ensure that it continues to serve its intended purpose. Questions to consider can include:
When does it take effect? If you live in a state that permits ‘springing’ powers of attorney, your attorney-in-fact (that is, the person who holds your power of attorney) is authorized to act only on the occurrence of the event stated in the power of attorney. Typically, the power is designed to ‘spring’ when you become incapacitated. If a power of attorney is not a springing power, the attorney-in-fact can act at any time after you have executed the document.
Is it durable? A durable power of attorney is one that continues in force after you have become incapacitated. Some states’ laws presume that a power of attorney is durable, but others do not, in which case a power may be unenforceable unless it expressly states that it is durable.
Is it powerful enough? Careful planning is required to ensure that your attorney-in-fact has the authority they need to carry out your wishes. There are certain powers that you should expressly include to ensure such authority. For example, you must specify whether your attorney-in-fact has the power to make gifts or to make estate planning decisions, such as transferring assets to a trust.
Is it too old? Your attorney-in-fact’s ability to act on your behalf depends on whether third parties are willing to honor the power of attorney. Sometimes banks and others are reluctant to rely on a power of attorney that is several years old. Therefore, consider signing a new one every two or three years.
If you have questions regarding power of attorney, please contact us. We would be pleased to help answer your questions.