POWERS OF ATTORNEY
Question: After procrastinating for years, my wife and I have decided to create an estate plan. Are there any documents, other than a will, that we need? Patrick R.
Answer: Patrick, you’d be amazed about how many telephone calls and e-mails we get from clients asking us to “make a will” for them While a will is an essential part of most estate plans, it is not the only document that should be prepared. A thorough estate plan should include a Power of Attorney, an Advance Directive for Health Care (also known as a Health Care Proxy) and, for some, a Living Will. Several types of Trusts may also be considered, depending on each individual’s circumstances. In addition, serious thought should be given to reviewing beneficiary designations in life insurance policies, retirement plans, pensions, even bank accounts. And thoughtful tax planning is also an integral part of an estate plan. In this edition of the LawLetter, we’ll talk about the Power of Attorney. We’ll discuss other estate planning documents and ideas in future editions.
Our answer to Patrick’s question starts with a question: If you become mentally or physically incapacitated, who will make financial decisions for you until you get better? Who will look after your business? Pay your bills? Cash your paycheck? Sign important legal documents? Pay taxes? Buy or sell stocks or other assets? Clearly, you would want someone you trust to take care of these important matters issues for you. Other common situations in which you might empower your “agent” to act for you are real estate transactions, banking transactions, insurance matters, Social Security and Medicare matters, estate matters, litigation, transactions involving retirement or pension benefits; and many more.
So what is a Power of Attorney? It is a written document by which you (the “principal”) give a trusted person or persons (the “agent” of “agents”) the authority or “power” to act on your behalf. Contrary to popular belief, an agent does not have to be attorney. People generally appoint their spouses, parents, adult children, trusted friends, etc., to serve in this important capacity. The authority your give to your agent can be very broad, or quite limited, depending on your wishes.
A problem that frequently arises if one does not have a Power of Attorney, is that relatives or other loved ones may have to petition a Court to appoint a Guardian to manage financial affairs. Guardianship proceedings can be expensive, time-consuming, and embarrassing. Your loved ones will have ask a judge to rule that you are “incompetent” to handle your own affairs—a very public airing of a very private matter. That is unfortunate and tends to create family discord.
Recently, the State of New York amended the laws relating to Powers of Attorney by adding greater protection for the “principal’ from the actions of less-than-faithful “agents.” While an already-existing power of attorney is still valid (if properly prepared), the new law adds many important protections. We’d be pleased to talk to you about updating your Power of Attorney.
As always, if you have questions about any type of estate matter, feel free to write or call.