Estate Planning Tools: Power of Attorney
By Lisa Lane McDevitt, Esquire on Monday, July 18, 2011
A power of attorney is an invaluable estate planning tool that you may not even realize you need.
There are two types of Power of Attorneys. First, there is a General Power of Attorney which broadly gives the agent (the person you are giving the power to) the right to act just as you. That is, to purchase a car, purchase a house, deposit and withdraw funds, etc. For example, this Power of Attorney would be useful for an elderly citizen that needs help with various day to day transactions. Second, there is a more limited power of attorney, called a Special Power of Attorney which specifically details the power given. This can be useful for a specific transaction. For example, this power of attorney would be good for a deployed soldier that needs someone to sell his car while he is deployed.
Normally a Power of Attorney can only act if you were able to act. That means if you were in a coma and unable to do a transaction, your Power of Attorney would not be able to do that transaction either. However, by inserting specific words in the Power of Attorney to make it a Durable Power of Attorney this obstacle can be avoided. A Durable Power of Attorney become effective immediately and survives your incapacity. This makes it a valuable estate planning tool. Immediately upon signing your Durable Power of Attorney your agent may act on your behalf. The agent would continue to have authority to act on your behalf if you were in a coma or otherwise incapacitated and the agent wouldn’t be burdened with having to prove your incapacity.
Your designated agent should be someone you trust completely, and someone who understands how you handle your business affairs. Remember, a financial durable general power of attorney is like handing someone a blank check to all of your assets. An agent is a fiduciary. This means that he or she must manage your assets for your benefit-not their own. The person you name will be called upon to act under difficult circumstances. Your disability may be sudden, catching everyone by surprise, and may last for an extended period of time. However, with the power of attorney in place, you and your agent will be better prepared to address your needs.