Power of Attorney
What is a Power of Attorney?
A Power of Attorney, also sometimes called a “Durable Power of Attorney” or “POA,” is an important component of a comprehensive estate plan. A POA allows you as the “Principal” to empower a trusted “Agent,” also sometimes called an “Attorney-in-Fact,” to act on your behalf and assist you with handling financial and property matters if you need assistance with such matters during your life. A POA can be designed to become effective immediately upon signing so it can be used to allow an agent to handle your financial matters when it’s not convenient for you to do so yourself as well as if you become incapacitated, or it can be designed to become effective only upon your incapacity (when you are determined to be unable to handle your financial affairs on your own). In the case of your incapacity, having a POA in place can help avoid the need for a court to appoint and oversight someone to serve as conservator of your property.
Typically, a POA is broadly drafted to allow the agent to perform a wide variety of tasks, such as paying bills, making and managing investments, applying for public benefits (e.g., Medicaid or VA Pension), and possibly creating or modifying a revocable living trust (RLT). Once a POA goes into effect, the agent’s power will not terminate unless and until (i) the principal revokes the POA or dies, (ii) a conservator is appointed by a court to handle the principal’s financial affairs, or (iii) a specific event or date triggers the expiration of the POA under the POA’s terms.
How to Create a Power of Attorney
The rules and requirements for POAs differ from state to state. On July 1, 2017, the state of Georgia enacted a new Uniform Power of Attorney Act (the UPOAA) that applies to most written, general financial POAs created by individuals in Georgia. The Georgia UPOAA includes a new statutory form POA that individuals can use to create a POA and appoint an agent and any successor agents to handle their financial affairs. It should be noted that we believe that GA’s statutory form POA has significant flaws, and it needs significant modifications through what the UPOAA calls, “Special Instructions.”
As noted above, a POA, once it goes into effect, will continue unless certain circumstances occur. However, an older POA has less chance of being accepted and honored by third parties, such as financial institutions. The older the POA, the higher the risk to third parties that the person presenting the POA to them to access your accounts may be a bad actor, and they would prefer not to get in the middle of such a situation. For this reason, the best practice is to update your POA every three to five years, even if your selected agents and POA provisions are staying the same.
Choosing a POA Agent
By far, the most important part of creating a POA is the selection of an agent. It is normally prudent to have an initial POA agent and at least one (but preferably two) successor POA agents. People who are ideal candidates for a fiduciary position, like an agent under a POA, will meet the following criteria:
- Someone who is honest and trustworthy beyond any doubt.
- Someone who will act responsibly to determine what needs to be done, who will complete those tasks in a reasonable timeframe, and who will seek professional help when needed in connection with carrying out their duties under the POA (such as hiring a certified public accountant, attorney, or other suitable professional).
- Someone who will not mind taking on such responsibility, which can require a significant investment of time and energy.
- Someone who does not have any significant conflict of interest that could affect their judgment or cause conflicts with other family members.
Using a corporate fiduciary, such as a trust company, can be a sure way to meet all these criteria. While it is true that most trust companies refuse to serve as an agent under a POA. Some will take on this responsibility if the POA’s principal is using a Revocable Living Trust (“RLT”) as the principal’s primary estate planning document, and as long as that principal has named that same corporate fiduciary as a Trustee or successor Trustee of the RLT. In addition, these corporate fiduciaries will require that their power as agent under a POA be somewhat restricted and be primarily to transfer all or most of the principal’s assets (depending on the type of assets) to the RLT, where the corporate fiduciary can then manage those assets as the Trustee of the RLT, rather than as an agent under a POA.
POAs are an important component of a comprehensive estate plan and require careful consideration. An experienced estate planning attorney, like the attorneys at Morgan & DiSalvo, P.C., can provide you with the information and advice you need to make sound estate planning decisions. Contact us at (678) 720-0750 to schedule a complimentary estate planning consultation.
Financial Power of Attorney