Power of attorney issues occasionally crop up when it comes to trusts and wills. Most center around a basic lack of knowledge about what a power of attorney is, and what it does or does not allow an estate beneficiary to do.
Unfortunately, all too often we at Trust Law Partners witness a lot of frayed nerves, disappointed or angry family members, plus wasted time and money because people misunderstood or misused the “power” of a power of attorney.
So, let’s clear the air.
First off, what is a power of attorney? A power of attorney, or POA, is a legal document that authorizes an individual—called the “agent” or “attorney-in-fact”—to make limited financial and medical decisions on behalf of another person called the “principal.” It’s typically granted for two reasons: one, to make financial decisions for someone who is unable to do so; and two, to make medical decisions for someone who is incapacitated and incapable of making decisions on their own.
It’s important to note that a power of attorney does not prevent the principal from taking action, provided they are physically and mentally capable of doing so. Thus, it is not the same as a conservatorship, where a court removes the principal’s power to act and gives it to someone else.
Most power of attorneys have conditions that trigger them. These could include a doctor or even two doctors certifying that the person isn’t able to make decisions on their own. This typically happens when estate owners—aging parents, for example, start suffering from mental incapacity. Or, a power of attorney could also be specifically granted for a period of time when someone is in the hospital, out of town, or otherwise unable to handle their own financial affairs.
While that seems pretty straightforward, you’d be surprised at how frequently powers of attorney can cause trouble when it comes to estate plans. Here are some examples:
Believe it not, some people—even a few professional attorneys-at-law—are under the impression that a general power of attorney authorizes changing an estate plan, or creating an original one, for the grantor of that power. Sad to say, but they’re greatly disappointed when they find out that they can’t. They’re even more upset when they learn that the estate plan crafted under that false belief is largely considered void under the law, further that they’ll have to go through the time and expense of crafting another estate plan.
Even a quick legal consultation with a firm like Trust Law Partners specializing in probate, trust and will cases could have prevented this problem.
Occasionally, clients will ask us why they can’t use the power of attorney to get assets on the death of the grantor after banks or investment institutions have refused to help them. The reason for this is simple. It’s because the “power” in the power of attorney dies when the principal (the person granting the power) does.
Simply said, a power of attorney is a document for the living, not a tool for beneficiaries to change the details of estate plan or access the principal’s assets after they’ve passed away.
Powers of attorney include various categories that authorize specific actions to be taken on behalf of the principal. These could include selling real estate, paying bills, transferring money between accounts, accessing retirement accounts or other financial decisions. Powers of attorney also have sections that authorize various medical decisions, as well as provisions for preventing life-saving measures. The person granting the power of attorney must review those actions that are authorized and check off the categories that would apply.
Here again is where many clients unfamiliar with the nature and limitations of powers of attorney can run into trouble. When it comes to trusts and wills, most powers of attorneys do not allow—nor even have a category for—changing an estate plan. If a power of attorney specifically says it can be used to make or change an estate plan, it can generally be used for that purpose.
Powers of attorney are sturdy legal instruments which, executed properly, can and should be used to benefit people. But they are often misunderstood and misused. The best advice is to have a legal professional, like one of the trust and will experts at Trust Law Partners, review and explain your particular power of attorney to help you understand what’s possible and what isn’t.