“A Power of Attorney, similar to a Last Will and Testament, is a powerful document that must be created before it becomes necessary.”
All too often, people wait until it’s too late to execute a power of attorney. It’s uncomfortable to think about giving someone full access to our finances, while we are still competent. Some estate planning attorneys believe that the Power of Attorney (POA) is actually the second most important estate planning document after a Will. Here’s what a POA can do for you.
The term POA is a reference to the document, but it also is used to refer to the person named as the agent in the document.
Generally speaking, any POA creates a fiduciary relationship, for either legal or financial purposes. A Medical or Healthcare Proxy creates a relationship for healthcare decisions. Sometimes these are for a specific purpose or for a specific period of time. However, a Durable POA is created to last until death or until it is revoked. It can be created to cover a wide array of needs.
Here’s the critical fact: a POA of any kind needs to be executed, that is, agreed to and signed by a person who is competent to make legal decisions. The problem occurs when family members or spouse do not realize they need a POA, until their loved one is not legally competent and does not understand what they are signing.
Incompetent or incapacitated individuals may not sign legal documents. Further, the law protects people from improperly signing, by requiring a notary and two witnesses to observe the individual signing.
The law does allow those with limited competency to sign estate planning documents, so long as they are in a moment of lucidity at the time of the signing. However, this is tricky and can be dangerous, as legal issues may be raised for all involved, if capacity is challenged later on.
If someone has become incompetent and has not executed a valid power of attorney, a loved one will need to apply for guardianship. This is a court process that is expensive, takes several months and leads to the court being involved in many aspects of the person’s life. The basics of this process: three professionals are needed to personally assess the “respondent,” the person who is said to be incompetent. The respondent loses all rights to make decisions of any kind for themselves. They also lose the right to vote.
A power of attorney can be executed quickly and does not require the person to lose any rights.
The biggest concern to executing a power of attorney, is that the person is giving an agent the control of their money and property. This is true, the document may be drafted to limit these powers or the grantor can keep the document to be delivered when needed.
Our firm can create the power of attorney that is best suited for each individual’s situation. This is the most sensible way to provide the protection of a POA, without worrying about giving up control while one is still competent.