A traditional estate plan typically includes a Durable Power of Attorney, often called a POA. Based on one’s unique needs, a POA can come in several forms and give an assigned person (the Agent) the ability to make financial or property decisions for you (the Principal) if necessary. Until the time, if ever, comes for your POA to be used, it’s helpful to understand what to expect and how to prepare your Agent(s) of choice to use this vital document.
CHOOSING YOUR AGENT
Before addressing what happens when a Power of Attorney is used, it’s good to consider how to select an Agent who will best handle your affairs. Some qualities to look for in this person are:
- Capable – rather than picking a family member or close friend out of obligation, choose someone who has the ability to do what you’re asking. An Agent is a fiduciary who should look out for your best interests. Sometimes your family members or friends are incapable of acting.
- Trustworthy – while family is often easier to trust, that’s not always the case; whoever you choose, be sure to VET THIS PERSON, as a POA is a very powerful document.
- Familiar with you and your wishes – choosing an Agent who lives nearby and understands your personal affairs may be wise to ensure your matters are handled properly.
Again, unless you anticipate poor health or surgery, you’re not typically aware of when your Agent will need to act on your behalf. Choosing someone who meets these criteria can help ensure they will be able to manage your property.
FINALIZING YOUR POWER OF ATTORNEY
Whether you’re a young adult or further down the road in years, establishing a Power of Attorney has many benefits and is typically inexpensive to create. Ideally, you generate your estate planning documents when you are in good health and do not expect to need them anytime soon. The Power of Attorney should be signed under state law, which typically requires two independent witnesses and a Notary be present. Once your estate plan is signed, your Power of Attorney is “live” and can be used if necessary. In order to act under the POA, your appointed Agent also needs to accept their role by signing an acknowledgment of the document.
Under Pennsylvania law, a copy of a POA – photocopy or digital copy – is considered valid. So, while your original Power of Attorney might remain in your possession, providing a copy to your Agent or letting them know where the document is stored may be helpful. Your Agent should be advised not to use the POA unless you are unable to handle your affairs. You may want to let your Agent know who your legal counsel is if assistance is needed.
BEST PRACTICES FOR YOUR POWER OF ATTORNEY
Implementing a Power of Attorney ensures that the Principal’s assets can be managed if necessary and avoids court-supervised guardianship. While you can’t guarantee your family members won’t have quarrels when it comes to your financial affairs, some steps can be taken to make it easier for your Agent to manage your affairs:
- Don’t wait until illness strikes to consider a POA – in order to sign a POA, a Principal has to possess legal capacity, which is the ability to make legal decisions and comprehend the document being signed. If you do not possess legal capacity, a guardianship will be required.
- If possible, let your Agent know they are named – an Agent named in a POA cannot act unless they know they are named in the document.
- Know your financial institution’s policies – sometimes, a financial institution requires you to fill out another set of documents to authorize your Agent to bank with them; consider introducing them to your Agent so they are familiar, especially if you are a more SENIOR ADULT.
- Keep your POA current – while some states used to require a POA renewal to be valid, MOST STATES PROVIDE THAT DURABLE POWERS OF ATTORNEY are valid as long as the Agent remains alive and has not revoked the document. It’s still wise to connect with your estate planning counsel every few years to review the document and see if changes need to be made.
- Name Co-Agents and Secondary Agents – consider naming Co-Agents who can act together on your behalf. It is also important to name successor Agents to act if your Agent cannot fulfill their duties.
THE POWER OF A POA
A Power of Attorney is not something to take lightly, so take great care in selecting your Agents.
Ensure your Agents are prepared to do what you’re asking them to do, including the nature of the fiduciary role and the property they will be managing. If you need assistance establishing a POA, please get in touch with a member of our Estates team.
