Planning Ahead With a Power of Attorney?

Answer 1

A sudden illness that incapacitates a person can have a devastating impact beyond just the physical impact. Planning ahead to have someone in a position to handle your financial affairs requires more than telling them what to do. Giving another person authority to act on your behalf requires preparation and execution of a power of attorney.

Formalities

A power of attorney is a signed and notarized document in which one person, the principal, appoints another person, the attorney-in-fact or agent, to handle financial matters if principal is unable or unavailable to handle them. The agent can be anyone who is 18 years of age or older.

Each state has its own laws regulating form, execution and use of powers of attorney within its jurisdiction. Although laws differ from state to state on form, contents and execution, a power of attorney recognized as valid under the laws of the state in which it was prepared and signed, is valid for use in other states.

Recent Trends

There has been a growing trend in the past five years to change how a power of attorney is used and prepared. Responding to concerns about misuse, many states have passed laws that prohibit or limit the authority of an agent to give gifts using the power of attorney. New York, for example, mandates that the ability of an agent to give gifts must be specified in a separate rider to the power of attorney. The rider, along with the power of attorney, must be signed by both the principal and the agent in front of a notary public.

Agent's Authority

An agent may use a power of attorney to do anything the principal can do concerning financial transactions. This would include real estate transactions, tax matters, banking, stock and bond transactions, litigation, retirement transactions and many others.

Termination and Revocation

A person who gives another party authority to act through a power of attorney may revoke it at any time. The laws differ from state to state on the procedure for voluntarily revoking a power of attorney, but the revocation must usually be in writing.

Death of the principal, but not of the agent, terminates a power of attorney. If the agent dies, the power of attorney continues with another agent who is designated by the principal.