Who Needs a Power of Attorney?
Everyone needs a Power of Attorney.
If something happens to you, the Power will allow someone you trust to get into your accounts, pay your bills and keep things on going without interruption. It also allows your trusted person (Agent) to do last minute estate planning.
It is one of the three core Estate Planning Documents which are the Will, Health Care Proxy and a Power of Attorney.
What a Power of Attorney Does
A Power of Attorney allows someone to manage your affairs for you. You can limit it so it is only available if you are incapacitated or upon certain events and in other ways. Essentially, the Agent is able to do anything that the Principal is able to do himself, such as banking, brokerage transactions, renewing leases, making decisions, and handling real estate.
When is the Power of Attorney Effective?
The Power is effective either immediately upon signing, or when you are incapacitated.
A Power of Attorney is most often used toward the end of life if you lose the capacity to manage your affairs on your own. However, you would also want a Power of Attorney in place if you are traveling abroad, in a car accident, undergoing major surgery, or incapacitated in any way.
If you give someone a Power of Attorney, you never lose the power to do all these things for yourself. You retain the power to do all of these things and your Agent can also do the same things.
What Powers are Granted by a Power of Attorney?
So what powers does the Agent have under a Power of Attorney? Generally an Agent can do anything that the Principal can do. The Power of Attorney form has a list of powers that the Principal gives the Agent, so you can choose among them. Most often, you will allow them to have all the powers unless it is for a limited purpose.
Agents are not allowed to make Gifts, unless specifically granted. The Agent's job is normally to maintain the Principal during his lifetime and not make gifts of assets which would pass under the Will. However, there many situations in which you would want an Agent to make gifts. Most are related to some tax, Medicaid or long-term care planning. In addition, you may want them to continue making gifts to support a child or grandchild.
Agents cannot act unless you are incapacitated, if you reserved this right.
The Agent cannot do anything after you die. At that time, the power to do anything with your assets moves to the Executor.
Durable Power of Attorney
The two most common types of powers of attorney are durable and non-durable. A non-durable Power of Attorney terminates upon the principal's incapacity. A durable Power of Attorney continues even after incapacity. Depending on your preferences, the scope of the agent's powers can be very broad or quite specific.
The Agent has a fiduciary duty which means the Agent has to act in your best interest. The Agent cannot take steps that are not in the Principal's best interests.
An Agent can't lend or gift himself or people associated with him money, invest in his business, or do anything else which is not in your best interest.
New York amended the Power of Attorney to require the Agent to sign a very specific statement about what the Agent is, and is not, allowed to do. In fact, acting in violation of the fiduciary duty to do what is in your best interest can be a criminal offense.
How Can You Protect Yourself?
There are a variety of ways to issue a Power of Attorney and protect yourself against misuse of the power.
You can can appoint a Monitor. The Monitor has the right to have financial records to monitor the Agent. In addition, the Monitor has the ability to go to Court stop the Agent from acting improperly. All your account statements should go to the Monitor also.
Another safeguard measure is the have someone hold the Power of Attorney for you. This can be an informal arrangement or rise to the level of a legal escrow agreement. They would give it to the Agent only in the event of incapacity and if they felt it was needed. For instance, you can sign the Power of Attorney and give it to your brother. You might instruct him that if there ever comes a time when he determines that you are incapacitated and unable to manage your affairs, then he should give your Agent the Power of Attorney.
You can limit the scope of the Agent's powers to very broad or quite specific.
You can terminate the Power of Attorney at any time. An Agent's authority may also end by court order. You can write a termination date or event into the Power of Attorney to terminate it and it always terminates upon the death.
Can a Power of Attorney be Abused?
Sadly, Powers of Attorney can be subject to abuse and there are legitimate concerns in executing them. In reality, they can be used to misappropriate your assets. You should only sign a Power of Attorney if you have an Agent whom you trust, such as a spouse, child, lawyer, or trusted friend. You should also consider implementing the various safeguards such as using a monitor and having the Power of Attorney held by a lawyer or friend only to be given to the Agent if needed.
Problems Using a Power of Attorney
Banks and financial institutions are problematic when trying to get them to recognize a Power of Attorney. They will scrutinize it for issues. They will require additional documentation. They may refuse to accept it or require continuing documentation of incapacity.
HIPAA and a Power of Attorney
HIPAA is a federal law that protects an individual's privacy by restricting access to the release of health information and has had a impact on the ability for agents to get to your medical records.
A Power of Attorney or a Healthcare Proxy or Living Will will not be effective for HIPAA unless it includes a clause appointing the agent as a "Personal Representative" under HIPAA.
Alternatively, you can appoint a Personal Representative by executing a separate HIPAA authorization form.
Healthcare Proxy Vs Power of Attorney
A Power of Attorney does not include decisions over your healthcare. A Healthcare Proxy (Healthcare Power of Attorney or Advance Healthcare Directive) is a separate legal document from the Power of Attorney. You will need a Healthcare Proxy in addition to a Power of Attorney. The Healthcare Proxy gives an Agent the power to make healthcare decisions for you.
The Alternative is a Guardianship Proceeding
The real problem is that if you don't have a Power of Attorney and you become incapacitated or unable to manage your affairs. The only other alternative is a Guardianship proceeding.
Trust me, you don't want to have to resort to a Guardianship proceeding. That means someone has to start a legal proceeding in court. It takes a long time, is expensive, and airs your issues in public.
Connecticut Power of Attorney Law
The new Connecticut Uniform Power of Attorney Act was enacted last year (Public Act No. 15-240).
This legislation was a major update for Connecticut law bringing it up to date for powers of attorney.
Essentially, the form is much more specific in the powers granted to the fiduciary.
The effective date is October 1, 2016. There is now a short and long form.
New York Power of Attorney Law
New York already has a similar law which was updated September 1, 2009 (N.Y. GOL §5-1501)
Do You Need to Update Your Power of Attorney?
If your Power of Attorney was signed prior to these dates, you should have it updated.
New York, Connecticut or another State Different Laws
Powers of Attorney are state specific, so it is best to consider the state you live in and where you need to utilize the Power when you draft and execute it.