One of the Big Three Essential Estate Planning Documents, a Power of Attorney helps make sure you have a reliable team ready to step in if you are ever unable to care for yourself. With a Power of Attorney, you pick your team, not the court.
You cannot be everywhere at once. Having another person stand in or sign for you might be necessary or merely convenient. A Power of Attorney is a document authorizing someone else to act as your Agent. An Agent is someone acting for you.
To create a Power of Attorney you have to be an adult of sound mind, able to understand the powers which you are granting to your Agent. Sadly, people often put off signing a Power of Attorney until either age or infirmity reduces their capacity, so they are no longer legally able to grant a Power of Attorney. In these cases, the family is required to file a Guardianship Petition, which is much more complicated and costly. Further, your wishes are no longer respected, the court picks the person who acts on your behalf.
The person given powers to act on your behalf is called either the “Agent” or the “Attorney in Fact.”
A Power of Attorney is part of every good Estate Plan. You typically sign a Power of Attorney at the same time you sign a Will and a Medical Power of Attorney. These documents are the “Big Three Documents” or “Must have Estate Planning Documents.”
Powers of Attorney can be either General Powers of Attorney or Special Powers of Attorney. Special Powers of Attorney can also be called Limited Powers of Attorney.
A General Power of Attorney exists when you grant your Agent broad, non-specific power to conduct any business or transaction on your behalf.
For example, let’s say that you plan to sell your Philadelphia house, but on the sale date, you are out of town in Atlantic County, New Jersey on business, unable to be in Philadelphia at the closing time to sign the documents. You can give a Special Power of Attorney to a trusted person to attend the closing on that specific date with the limited power of signing the closing documents. You could even narrow the authority to sign those documents only on that one day in a certain location. A Special Power of Attorney can be crafted to address any number of specific situations.
A Power of Attorney is durable if its forces continue even if you become incapacitated.
You, rather than a judge, select the person who has control over your assets and your care.
You avoid the time and expense of a Guardianship proceeding.
You and your family have the peace of mind knowing that if you become incapacitated, you have implemented a plan.
If you are concerned about who could handle your affairs should you ever become incapacitated, then you need a Durable General Power of Attorney. A Durable General Power of Attorney grants very broad powers to your Agent, usually so large that the Agent can replace you.
For example, if you part of a married couple in Philadelphia and you own a Philadelphia residence in both you and your spouse’s name, if one of you should be in a car accident and go into a coma, the survivor may need to sell the house. But, the house is in both names and both signatures are required to sell the house. Without a Durable Power of Attorney, to sell the house, your Estate Planning Attorney must petition the court for a Guardian’s appointment. The Judge will appoint someone as Guardian of the Estate to sign the deed. This is much more expensive, and the court is free to decide who is named as the Guardian. The Court may appoint a bank; not your spouse. By executing a Durable General Power of Attorney naming a person you trust to serve as your agent, you avoid these extra steps. Your wishes are respected.
If you become incapacitated because of an accident, illness or age, you could be taken advantage of by unscrupulous persons or family members. If you select an Agent in Fact in your Power of Attorney while competent, your trusted person is tasked with protecting you.
If you fail to execute a Power of Attorney, then the state takes over. To protect incapacitated people, the State created a system where the Court appoints Guardians. Unfortunately, the judges do not know you or your family. They do not know whom you trust and to whom you would like to have these extensive power. The judge will select someone to care for you, but it may not be someone that you would have picked. Further, the process of petitioning the Court and having the hearing can be very expensive, using up funds that should otherwise go towards your care.
Because the person granting the power must sign the document, you can’t “get a power of attorney” over someone. They must give you the power. If a person is no longer competent to sign a Power of Attorney, then filing for Guardianship is necessary.
Most often a General Power of Attorney will be open-ended, ending only at your death or when you choose to Revoke the General Power of Attorney. A Special Power of Attorney often limits by its terms how long it will last, as a Special Power of Attorney is often crafted to address a specific event at a particular time. For example, if you cannot attend the sale of your Philadelphia home on June 4th, you may give your Philadelphia lawyer a Special Power of Attorney to sign those documents, but only on June 4th of this year.
A Power of Attorney can list a specific expiration date, but this is not normal. Most Powers of Attorney are General Powers of Attorney that have no expiration date and continue until revoked, or the grantor dies.
Select as your Agent only someone that you would trust with all your assets and your life. All Attorneys-in-Fact must be adults of sound mind. If you are selecting an Agent for a Special Power of Attorney, then there is usually a specific task on a specific date to address. You should choose a person you trust that can competently handle this job on that date. If you are selecting an Agent for a General Durable Power of Attorney, then your Agent will have lots of responsibility for a variety of tasks and that responsibility could be over an extended period. If you have become incapacitated, this person cannot consult with you for your opinion. You should select a person who will shoulder this responsibility, who is trustworthy, honest and will be able to make difficult choices. If you have children, then you also need to take into consideration your family dynamic. Will one of your kids feel slighted if you do not pick him or her, and will that feeling pour over into conflict with the child you did select?
Certainly, but you should be honest about the personalities of the people you choose. They might have to make difficult choices with one another over an extended period. If your children do not work well together, then they should not be Co-Agents. If you name two or more Agents, you must be clear if the Agents may act independently or whether they must act jointly. Giving your Agents the right to act alone allows them great flexibility, but confusion may result if they work counter to one another. If you require your Agents to work jointly, then each will be part of every decision, but a deadlock may result if they cannot negotiate over important matters. Once again, knowing your Agents and how they will work together is of vital importance.
A General Power of Attorney gives great power. You can balance this authority in some ways. You can select 2 or more persons as “Co-Agents,” having to make all decisions together. You could select a bank or trust company as your Agent. You can also require that your Agent provides others a detailed report of all transactions. There are several options, but the best choice will depend on your particular set of circumstances.
Distance has diminished as a factor when selecting an Agent. In today’s world of scanned documents and the internet, if one of your children lives in California and the other lives in Doylestown, they can easily serve as Co-Agents.
There is no requirement that you name your husband or wife as your Agent.
Yes! If your husband or wife become incapacitated, you can still sign checks and make withdrawals on joint bank accounts, but you cannot sell jointly owned stocks or real estate without your Spouse’s signature. You also cannot easily get information from your spouse’s pension or qualified plan provider (401k, IRA, SEP, etc.) or even sue the person who caused an accident that made your spouse incapacitated. You might also have problems obtaining information from insurance companies.
For example, if you and your spouse own a house in Cherry Hill jointly, but your spouse has become incapacitated, you might need to sell the house and move into an apartment. If your spouse has not provided you a Durable Power of Attorney, you will not be able to sell the house without your spouse’s signature. It is a good practice for both spouses to have Durable General Powers of Attorney.
No. By signing a Power of Attorney you are giving your Agent the power to take care of projects on your behalf, but does not limit your ability or authority to do things on your own. You can revoke your Power of Attorney at any time and name another person as your Attorney in Fact.
Selecting the right Agent is important because you might lose some ability to care for yourself and you want an Agent that will work with you, not try to take over from you when you still can do some things on your own.
Granting a Power of Attorney can give your Agent lots of power, but not giving the Power of Attorney can leave you exposed if you should ever become incapacitated. How to balance these two, valid concerns? Firstly, my clients store their Powers of Attorney for free in my fireproof safes, authorizing me to release the powers of attorney to the Agent ONLY if the client has become incapacitated. This way the Power of Attorney is signed, ready to let the trusted Agent take over in case the client becomes incapacitated, but the Agent has no access to the document while the client is competent. Secondly, you can appoint Co-Agents, so two people must agree before acting. Your particular situation might allow some other protective steps. I am happy to brainstorm ideas with you!
Years ago it was common to use “Leaping” Powers of Attorney, which only came into power if you became incapacitated. The problem with these documents is that banks and other financial institutions do not want the responsibility of determining if you are incapacitated. Some of these documents required a doctor to write a letter declaring you incapacitated, but this exposes the doctor to potential litigation if the Agent should misuse your funds, so doctors often decline. If you wish to have a Power of Attorney, but you are hesitant because you don’t want the Agent to use the document if you are competent, then I suggest you store the Power of Attorney for free in my fireproof safes. You then provide me written instructions to release the powers of attorney to the Agent but ONLY if you have become incapacitated. This way the Power of Attorney is signed, ready to let the trusted Agent take over in case you become incapacitated, but the Agent has no access to the document while you are competent.
If your spouse is your agent, then the Power of Attorney will end the day the Court grants your divorce, but if you are getting divorced you likely no longer wish your spouse to have control over your assets. As soon as you feel uncomfortable with your spouse having power over your assets, you should consult with an Estate Planning Attorney about naming another Agent. You are not required to name your spouse as your Agent.
Your Agent is a fiduciary, and he or she is obligated to follow your instructions and act in your best interests. Your Agent should keep accurate records of all actions taken and all assets under the Agent’s control. If the Agent harms you, the Court can force the Agent to repay or repair the damage (see Surcharge Action). The Court can make an Agent provide a full Formal Account of every action taken and every expense.
If an Agent under a Power of Attorney has violated his fiduciary duty, an interested party can bring a number of actions. Learn more here, specifically;
Recovery of Assets from an Agent. An Agent is a fiduciary and owes a fiduciary duty. If the Agent has wrongfully taken assets then a judge can order their return.
Any action against an agent including a petition for Formal Accounting must be brought in the appropriate court. The Estate Litigation Attorney assists in filing objections to the Accounting, often followed by discovery. Discovery may include obtaining copies of financial documents, depositions, interviews, and interrogatories of the fiduciary as well as financial advisors, beneficiaries, bankers or physicians. This evidence must be presented to the judge in an orderly fashion to support the objections. This process is complicated and is best handled by an Estates and Trusts focused attorney.
An Agent is a fiduciary and owes a level of duty and responsibility. Many Agents are not professionals and are unfamiliar with their duties. The court does not let the Agent use inexperience as an excuse. If the Agents’ actions or inactions cause harm, the court will “Surcharge” the Agent to correct the damage. This Agent pays the Surcharge out of the Agent’s funds. Because of this fiduciary duty, the courts recognize that an Agent can use estate funds to retain an attorney to provide advice. Virtually all professional Agents have legal advisors, to prevent them from accidentally causing harm resulting in a surcharge.
If you are an Agent under a Power of Attorney, consider retaining an experienced Estate Planning Attorney from our firm to advise and protect you.
If the Court decides that you need a permanent Guardian, then your Durable Power of Attorney will end. If this happens, the judge will likely have determined that your Agent is not looking out for your best interests. The judge could name a temporary guardian, only suspending the Durable Power of Attorney for some time. Otherwise, the judge could appoint for you a permanent Guardian of the Estate, but not a Guardian of the Person, leaving the Agent in charge of your daily activity but giving the Guardian of the Estate power over all financial decisions.
You can “Revoke” your Power of Attorney at any time as long as you are competent (you understand what you are doing). The burden of informing all your financial institutions is on you, so if something has occurred to cause you to revoke your power of attorney, have your Estate Planning Lawyer officially communicate this to the Agent and to any other person or entity to whom your Agent might take the Power of Attorney. Protecting you is best accomplished by having your Power of Attorney Lawyer draft a revocation.
By accepting the job of Agent under a power of attorney, you have accepted a fiduciary position of responsibility. Any interested party can force you to account for all your actions in front of the court and, if the judge finds that your decisions in any way harmed the person you were acting for, the judge can “surcharge” you from your funds to right the perceived wrong.
Because you are personally liable, and because most powers of attorney allow you to obtain legal representation to advise you, you would be wise to retain on of our attorneys experienced in estate law. As your attorney, we would advise you as your attorney. If any interested party were to file a petition to force you to account for your actions, we would help you be prepared and assist you in preparing and filing the formal account with the court. We would also assist you in responding to any objections filed to your accounting.
If you are an Agent under a power of attorney, you need an experienced estate litigation attorney to represent you.
If you have any questions about Power of Attorneys and any other estate planning topics, please contact our office to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate planning techniques clearly and concisely. We make it easy for you to understand estate planning so you can make the best decisions for yourself and your family
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