Understanding Estate Planning – Part 3
UNDERSTANDING POWERS OF ATTORNEY
(Originally Published October 2013)
WHAT IS A POWER OF ATTORNEY?
Some times in life, we want to give another person the legal authority to make decisions for us when we cannot make the decision ourselves. The document that is used to do this is called a “Power of Attorney”… essentially authorizing someone to act as our “Agent”. The person granting this power is called the “Principal”.
WHAT POWERS DOES THIS AGENT HAVE?
Your Agent under a Power of Attorney has as much or as little power as you choose to give them and that generally is determined by why the power is being given. Some forms are called: “Limited or Special Powers of Attorney”. For example, if you are buying a home and the escrow signing is scheduled but you suddenly have to leave the Country on business, you can designate someone to sign those documents on your behalf. Other times, the power may be broader and longer lasting. An example of this is a real estate property management agreement where you designate someone to make most of the decisions concerning the property including the handling of your related money. The power of attorney used in Estate planning is very similar and is called a Power of Attorney for Estate Management. This however is typically considered a “General Power of Attorney” and is intended to last as long as the Principal is alive or until it is revoked. This grants the Agent the authority to make all decisions concerning the Principal’s property and financial affairs.
In all such documents you are granting your Agent the power to act as your Fiduciary. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. Generally this involves the handing of money or assets of value. A fiduciary is required to exercise the highest duty of care and loyalty and to not put his own personal interests ahead of this of the Principal.
WHEN DOES THE POWER OF ATTORNEY TAKE EFFECT?
Generally powers of attorney take effect as soon as they are signed since they are addressing an immediate need. However, in Estate Planning, the right of the Agent to exercise the powers generally does not take effect until the occurrence of some event, usually the incapacity of the Principal. Two forms of this are typical and are often used to accomplish the same purpose: 1) the Durable Power of Attorney which takes effect immediately and continues even if the Principal becomes incapacitated; and 2) the Springing Power of Attorney which takes effect only when the Principal becomes incapacitated.
HOW LONG DO POWERS OF ATTORNEY LAST?
The duration of the powers exist as long as the document creating them provides… or until the Principal dies, whichever comes first. Generally, this is as long as the powers are needed. For example, the person traveling would not need the Power of Attorney to continue after the home has been purchased and the property manager would not need the Power of Attorney to continue after the management contract has ended. In Estate Plans the powers generally last until the Principal either dies or revokes the Powers.
IF I HAVE A TRUST, WHY WOULD I NEED A POWER OF ATTORNEY IN MY ESTATE PLAN?
The Successor Trustee in a Trust has all of the same powers and obligations as the Agent under a Power of attorney, including the fiduciary duty. The reason for the Power of Attorney is the Estate Plan is the same reason why we have a Pour-Over Will… it fixes a problem the arises if the Trustor forgets to put all of their assets into the Trust. The Successor Trustee can only control Trust assets; the Agent under the Power of Attorney can only control non-Trust assets. More importantly, if the Agent under the Power of Attorney discovers there are non-Trust assets, they can transfer those assets into the Trust which is most likely what the Principal would have done.
CONCLUSION
In planning your Estate now, you are demonstrating the foresight and concern that will save your family and survivors time, trouble, money and grief. Our easy-to-follow Estate Planning Worksheet will guide you in assembling all the information you need to get your personal Estate Plan started. We look forward to assisting you and your family in this most important concern. Also please feel free to refer our services to other family members or friends who may not have begun their own estate planning. If you are ready to get started now, call our office at (916) 966-2260 and schedule an Estate Planning Consultation.
UNDERSTANDING POWERS OF ATTORNEY
(Originally Published October 2013)
WHAT IS A POWER OF ATTORNEY?
Some times in life, we want to give another person the legal authority to make decisions for us when we cannot make the decision ourselves. The document that is used to do this is called a “Power of Attorney”… essentially authorizing someone to act as our “Agent”. The person granting this power is called the “Principal”.
WHAT POWERS DOES THIS AGENT HAVE?
Your Agent under a Power of Attorney has as much or as little power as you choose to give them and that generally is determined by why the power is being given. Some forms are called: “Limited or Special Powers of Attorney”. For example, if you are buying a home and the escrow signing is scheduled but you suddenly have to leave the Country on business, you can designate someone to sign those documents on your behalf. Other times, the power may be broader and longer lasting. An example of this is a real estate property management agreement where you designate someone to make most of the decisions concerning the property including the handling of your related money. The power of attorney used in Estate planning is very similar and is called a Power of Attorney for Estate Management. This however is typically considered a “General Power of Attorney” and is intended to last as long as the Principal is alive or until it is revoked. This grants the Agent the authority to make all decisions concerning the Principal’s property and financial affairs.
In all such documents you are granting your Agent the power to act as your Fiduciary. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. Generally this involves the handing of money or assets of value. A fiduciary is required to exercise the highest duty of care and loyalty and to not put his own personal interests ahead of this of the Principal.
WHEN DOES THE POWER OF ATTORNEY TAKE EFFECT?
Generally powers of attorney take effect as soon as they are signed since they are addressing an immediate need. However, in Estate Planning, the right of the Agent to exercise the powers generally does not take effect until the occurrence of some event, usually the incapacity of the Principal. Two forms of this are typical and are often used to accomplish the same purpose: 1) the Durable Power of Attorney which takes effect immediately and continues even if the Principal becomes incapacitated; and 2) the Springing Power of Attorney which takes effect only when the Principal becomes incapacitated.
HOW LONG DO POWERS OF ATTORNEY LAST?
The duration of the powers exist as long as the document creating them provides… or until the Principal dies, whichever comes first. Generally, this is as long as the powers are needed. For example, the person traveling would not need the Power of Attorney to continue after the home has been purchased and the property manager would not need the Power of Attorney to continue after the management contract has ended. In Estate Plans the powers generally last until the Principal either dies or revokes the Powers.
IF I HAVE A TRUST, WHY WOULD I NEED A POWER OF ATTORNEY IN MY ESTATE PLAN?
The Successor Trustee in a Trust has all of the same powers and obligations as the Agent under a Power of attorney, including the fiduciary duty. The reason for the Power of Attorney is the Estate Plan is the same reason why we have a Pour-Over Will… it fixes a problem the arises if the Trustor forgets to put all of their assets into the Trust. The Successor Trustee can only control Trust assets; the Agent under the Power of Attorney can only control non-Trust assets. More importantly, if the Agent under the Power of Attorney discovers there are non-Trust assets, they can transfer those assets into the Trust which is most likely what the Principal would have done.
CONCLUSION
In planning your Estate now, you are demonstrating the foresight and concern that will save your family and survivors time, trouble, money and grief. Our easy-to-follow Estate Planning Worksheet will guide you in assembling all the information you need to get your personal Estate Plan started. We look forward to assisting you and your family in this most important concern. Also please feel free to refer our services to other family members or friends who may not have begun their own estate planning. If you are ready to get started now, call our office at (916) 966-2260 and schedule an Estate Planning Consultation.