What is a Power of Attorney and why do I need one?
A Power of Attorney is a written document signed and acknowledged by one person (the principal) authorizing another person (the attorney-in-fact or agent) to act on his/her behalf. The law specifically provides that a Power of Attorney may confer authority upon an agent to conduct banking transactions on behalf of the principal. A Power of Attorney permits you to appoint someone else to manage your financial affairs at a time when you cannot do so yourself. This document can be a lifesaver in terms of avoiding or alleviating crisis situations, which may arise from accident or illness. The agent can do whatever the principal may do, such as withdraw bank funds, pay bills, cash checks, trade stocks, and buy and sell real estate.
When does the Power of Attorney become effective?
Usually once the principal signs it. Sometimes a “springing” Power of Attorney is used. This document does not become effective until some specified event in the future occurs. Typically, this event is the incapacity of the principal, which is then certified by one or more physicians.
What if I change my mind?
The principal can decide at any time to revoke the Power of Attorney. The agent then can no longer act under that power.
Will my bank or brokerage firm honor my Power of Attorney or can they insist on using their own form?
The law provides certain safeguards to protect against the misuse of a Power of Attorney. The document must conform to certain standards before a bank or other financial institution will accept and rely on it. It must be signed and acknowledged before an attorney at law or notary public in accordance with state law.
The bank must view a form of the Power of Attorney, which has an original signature of the principal. If the original is not available then the bank must receive an affidavit from the agent that the original is not available and a photocopy of the document certified to be a true copy of the original by another bank or county recording office. If your Power of Attorney complies with the law it must be accepted. If, however, the signature is not genuine then the bank must refuse to rely on the document.
How long does the Power of Attorney remain in effect?
Until you revoke it, become incapacitated or die. Any third person may rely on the Power of Attorney until it receives notice of one of these events.
Can the Power of Attorney remain in effect when I become incapacitated or disabled?
A Power of Attorney can, and in most instances should, be made a durable one if it contains specific language stating that it remains in effect during the principal’s disability. This, of course, is when most people want to be able to use the Power of Attorney.
Can I appoint more than one agent?
Yes you can. Co-agents can act together or independently, depending on how your Power of Attorney is worded.
Is the agent personally responsible for his/her actions?
Yes, if the agent commits an act of willful misconduct or gross negligence. If the agent acts in good faith then he/she will not be personally responsible.
What is the difference between a power of attorney and guardianship?
A guardian is someone appointed by a court to manage the personal and financial affairs of another person. This is a more formal arrangement than a Power of Attorney and is more costly to set up. It is, however, often necessary when someone can no longer sign a Power of Attorney.
Is there anything else I need to know about a Power of Attorney?
A bank may refuse to accept a Power of Attorney first presented to it more than 10 years after it was executed or on which it has not acted for a 10 year period unless the agent is a parent, spouse or descendent of a parent of the principal. Therefore, it is a good idea to update your Power of Attorney if it has gone unused for a period of more than 8 or 9 years.
What should I do next?
You should evaluate your situation. What would you do if you could no longer conduct your own affairs? Do you have a support system set up? Consult with a competent elder law or estate-planning attorney who can prepare a Power of Attorney tailored to your particular needs and wishes. Doing this now can save you and your loved ones the heartache and expense of a guardianship proceeding. For more information or to schedule an appointment contact us by e-mail at Yale@HauptmanLaw.com or telephone at (973) 994-2287.