The Importance of Powers of Attorney in Estate Planning
By Amy L. Knapp, Esquire
Most of us will suffer some sort of disability or incapacity during our lifetime, during which we will require assistance with the management of our property and affairs.
When contemplating an estate plan, it is important to think of not only managing one’s estate after death, but during life. Failure to plan for disability and/or incapacity in advance will cause you and your family to incur unnecessary expense, delay, and stress. Proper planning, however, will avoid many of the legal and economic difficulties that are sure to arise. One of the most valuable and inexpensive tools at your disposal to plan for incapacity or disability that continues to be under utilized, is a Durable Power of Attorney.
What Is a Durable Power of Attorney?
A Durable Power of Attorney is a legal document in which a person (called the “Principal”) appoints an agent (sometimes referred to as an “attorney-in-fact”) to act on his or her behalf in personal, financial and business dealings. The agent, in effect, stands in the shoes of the principal and acts for him or her in financial and business matters. The agent can do whatever the principal may do.
When Does a Power of Attorney Take Effect?
A Durable Power of Attorney not only can vary as to the amount of authority granted to an agent, but also speaks to when the Power of Attorney goes into effect. The time in which a Power of Attorney takes effect is solely dependent upon which Power of Attorney you choose. There are two basic types of Powers of Attorney. The first type is called a General Durable Power of Attorney wherein you grant to your agent broad and complete powers to act as you would yourself in any transaction. This Power of Attorney goes into effect irrespective of any incapacity. The other type is called a Springing Durable Power of Attorney which also grants your agent broad authority, but does not confer any power or authority on your agent until a specific event such as described in the document (typically, incapacity of the principal) occurs. Both types of powers of attorney once in effect, however, will remain in effect for your lifetime unless revoked by you.
Does a Durable Power of Attorney Take Away My Rights?
Absolutely not. A Power of Attorney does not take away the rights of the principal. It simply permits an agent the power to act according to the principal’s authorization as set forth in the document. It is similar to handing the keys to one’s car to someone else. Just as the keys can be taken back, so can a Power of Attorney be revoked.
Who Should I Select as My Agent?
The agent you select will have a great deal of authority to act on your behalf. Thus, the selection of an agent is the most important decision you must make in the preparation of a Durable Power of Attorney. Your agent should be someone with whom you feel comfortable, and who is competent to manage your affairs. You should also name a Successor Agent who will act on your behalf if your primary agent cannot, or will not serve.
Why Do I Need a Durable Power of Attorney?
It is good planning. Incapacity or illness can occur to any of us at any time. If you are incapacitated in a car accident, have a debilitating physical or mental disease, your agent can handle you finances and pay your bills. Simply put, a Durable Power of Attorney allows you to appoint someone that you trust to manage your personal, financial and business affairs for you in the event that you are unable to handle them yourself. It is an extremely valuable tool that can be utilized in anticipation of incapacity. This document gives you security in knowing that someone you have appointed and trust will be managing your affairs in a way that will best serve your interest.
What Happens If I Have Not Given Someone a Durable Power of Attorney and I Become Incapacitated?
Without a Durable Power of Attorney, no one is allowed to make financial or other decisions for you. A Durable Power of Attorney serves as an alternative to a guardianship or conservatorship. If you fail to appoint an agent to manage your property and affairs, it will become necessary for your family members to seek a guardianship through the court to obtain the authority to handle your affairs. A guardianship proceeding is a legal method used for declaring a person disabled or incompetent and for appointing a guardian to handle that persons business and financial affairs. This can be a time-consuming and expensive process which could have been avoided had a valid Power of Attorney been put in place. Thus, the proverbial ounce of prevention can be easily and economically obtained with a valid Power of Attorney.
The likelihood of a disability in your lifetime is real. A Durable Power of Attorney is a valuable tool which enables you to manage your affairs if you become incapacitated and/or unable to manage your own affairs. Simply put, a Power of Attorney allows you to take a pro active role in determining how you and your estate will be handled in the event of your incapacity.
Seeking advice on Powers of Attorney should be a part of anyone’s estate planning sojourn, and can easily and economically be worked into your estate plan. If you have questions, or would like to schedule a free consultation, please call the Law Offices of Lee M. Perlman where you will speak with an experienced estate planning attorney who will work to assist you in meeting your estate planning objectives.
Powers of Attorney questionnaire provides you with everything you need to know to prepare yourDurable Powers of Attorney.
This document is not intended as a substitute for legal advice. It is distributed for general informational purposes only. While every precaution has been taken to ensure the accuracy of this document, the Law Offices of Lee M. Perlman assumes no responsibility for any errors, omissions or damages resulting therefrom. If the information contained herein is inaccurate or misleading, you may make a report to The Committee on Attorney Advertising, Hughes Justice Complex, CN 037, Trenton, New Jersey 08625