09 May Triage you Estate Plan: Power of Attorney
by Michelle Shagenov, Esq.
In my last post, I discussed the health care proxy as a valuable “estate planning” tool. I emphasized the importance of self-reflection and communicating your wishes about health-care decisions to loved ones. I explained that a health care proxy allows YOU, not a Court, to choose who will make health care decisions for you in a medical emergency. I noted that a health care proxy can help you avoid family conflicts about your care by giving only one person the authority to make those decisions.
Like the health care proxy, the power of attorney document is a powerful tool for “estate planning” because it allows you (the principal) to choose someone (an agent) to make decisions for you if you are unable to make those decisions yourself. Similar to the health care proxy, if you do not have a power of attorney in place and are no longer able to handle your own affairs, a Court will have to appoint a guardian to do so for you. The guardian appointed may very well be a perfect stranger!
Unlike the health care proxy, the authority given by a power of attorney is very broad and covers most financial and legal transactions. For instance, with a power of attorney in place, your agent can buy and sell property, borrow money, represent you in legal matters, and decide where you will live. The power of attorney can go into effect as soon as the document is signed by you and your agent (durable power of attorney) or when you are no longer competent to handle your own affairs (springing power of attorney). Since a durable power of attorney takes effect as soon as your agent signs the document, your agent is able to step in at a moment’s notice, regardless of your health condition or mental capacity. For instance, your agent can sign real estate closing documents for you if you are on vacation at the time of the closing. On the other hand, a springing power of attorney requires two doctors to certify to lack of mental capacity before the power of attorney document takes effect. For this reason, many clients and estate planning practitioners prefer the durable power of attorney.
You can name any one who is over the age of 18 as your agent. However, the power of attorney document grants an agent virtually limitless authority, which can be an invitation to financial abuse in the wrong hands (e.g., the Brooke Astor case). Since more than one person can act as an agent on a power of attorney, if you have any concerns about the person you are naming, one solution is to require that your agents act jointly and sign all documents together. Another option is to grant the agent limited power of attorney for one bank account where they are listed jointly with you for convenience. If you become dissatisfied with the relationship, you can revoke the power of attorney and remove that person from the bank account at any time. Of course, the best strategy is not to name someone you do not trust as your agent in the first place!
Each state’s laws on the power of attorney differ regarding additional safety measures. In New York State, the power of attorney may be modified to require the appointment of a monitor to supervise your agent. In addition, in New York State, if you would like to allow your agent to give gifts over $500 to himself/herself or anyone else, you must sign a separate document in the presence of two witnesses and a notary.
Even though the power of attorney provides broad ranging power, that power ends at the principal’s death. In my next post, I will discuss the Last Will and Testament, which is the document that advises a Court about who will handle the affairs of an estate and who will receive an inheritance.
Don't miss Michelle's past posts on Estate Planning and stay tuned for the next installment!
Michelle Shagenov is a NY and NJ licensed attorney with a solo New York City based practice, focused on wills, trusts, estates, and guardianship. For more information, please contact Michelle Shagenov at firstname.lastname@example.org or (347) 618-1454.