Last week I had a discussion with a friend about Durable Power of Attorney (POA). She was under the impression that a Durable Power of Attorney lasts forever. She’s educated, has her paperwork in order, but had some misunderstandings about POA vs. Executor/trix which is prompting me to write this post.
What is a Power of Attorney (POA)?
A Power of Attorney (POA) is a legal form where you (the Principal) designate someone (an agent) to handle your financial matters, such as pay bills, manage your investment accounts, etc. Most states require a written form signed by both you and your agent, and many require that it be notarized.
A POA is only valid while you are alive. Immediately upon your death, your Last Will and Testament is activated and your Executor or Executrix takes over making all POA’s invalid.
If the person designated as your POA is also your Executor/trix, he or she has to establish that by producing a valid Last Will and Testament and getting it validated by a probate court. Link to part 1 of Probate article. If you die without a will, the court will appoint someone who is called an Administrator or Adminstratrix.
What kinds of POA’s are there?
There are several kinds of POAs. All of them perform the function of allowing someone else to represent you at transactions that require your signature and identification. The various forms allow you to limit the power you give someone else by:
- Type of transaction
Above: New York State Power of Attorney form.
There is a temporary or limited POA, a financial POA, a durable POA and more. What are these and which one do I need?
- Temporary Power of Attorney or Limited Power of Attorney: My parents were travelling while their home was listed for sale. Rather than fax/fedex documents internationally, they designated me as a temporary POA in case the house sold while they were away. Other situations where a Temporary POA can be useful are when you are traveling overseas or spend time in a different home during the summer or are snowbirds (live in Florida or another state during the winter).
- Durable Power of Attorney: Establishes someone else to see to your affairs. This person will be able to make decisions for you in all areas of your life, unless you specifically designate someone else to be your Health Care Proxy. This person can do anything and everything on your behalf. Basically, be you!
Who should I choose? Someone whom you can trust completely – most likely a spouse, child or parent.
If you think your child will withdraw all your monies and take off, then this child is not a good choice. I have heard of this happening!
You may be better off choosing your attorney or accountant.
- Financial Power of Attorney: Establishes someone to oversee your finances. This person will be able to access your financial accounts and make financial decisions on your behalf, including applying for credit, purchasing assets and selling assets and more. Basically, he or she can do anything you can do financially.
Who should I choose? Someone whom you can trust completely – most likely a spouse, child or parent. Choose someone who is good with managing money. If you think your child will withdraw all your monies and take off, then this child is not a good choice. I have heard of this happening!
You may be better off choosing your attorney or accountant.
- Health Care Proxy (also called Health Care Power of Attorney): Establishes someone to be your Health care advocate. This is someone who can make health care decisions on your behalf when you are incapable of making those decisions for yourself.
Who should I choose? Someone who will not fall apart at the sight of you in an ambulance or lying comatose in a hospital! This may be your spouse or your best friend or mother. Seriously consider someone who will respect your wishes – hopefully you have spoken with them about what you want in case you have been pronounced brain dead, on a feeding tube, etc.
Of course, you can help this person by having discussions about what your wishes are if you end up in a situation where you cannot make decisions for yourself. Having these discussions ahead of time will help your Health Care Proxy remain calm and make the best decisions according to your wishes. This is especially important if some of your family members disagree with your wishes or the Proxy’s decisions. Having a Living Will and Advance Directives in order will go a long way to help your Proxy. Provide link to Will Article.
Important Note: You cannot name caregivers such as in-home help, health care providers such as doctors, nurses or aides as your Health Care Proxy.
How do I set someone up as a POA?
You can download a Power of Attorney form from your State Attorney General’s website, fill it out and sign it in front of a Notary Public. Most banks have a Notary Public and will do this for free, especially if you have a bank account. Most town clerks are also Notary Public’s and as a resident they can provide this service free of charge. A Notary Public is someone who verifies your identity and makes sure you are not signing something, under pressure from someone else, usually a child or other relative.
Revoking a POA
You can revoke a POA at any time.
POA is a useful and convenient tool in many situations. However, you are giving your designated agent the authority to act on your behalf “as if” that agent is you. Therefore, there is potential for misuse of this power.
Be careful to select someone you trust and wants to be of help to you. The convenience and time saved by having someone who can take care of various duties on your behalf can make a big difference.
Disclaimer: This is simple, practical advice. If you have a complicated situation or feel like you need further information, please consult an attorney.
Do you like this article? Let me know your #1 takeaway in the comments section below.
Jasmine Alexander has a B.S. in Computer Science from NYU and a M.B.A. from UCLA Anderson School of Management and is the Founder and CEO of www.jazmine.com, an online organizer that safely stores personal records, account numbers, ownership documents and everything in between.