Why You Need a Power of Attorney.
A Power of Attorney (“POA”) is a voluntary delegation of authority that requires the person granting the authority to have mental capacity- that is, they must understand the consequences of what they are doing. Far too often, my office receives phone calls from desperate clients who need to handle their infirm loved ones’ financial affairs. Unfortunately, by the time the need for a POA arises, the window to sign the POA has already closed.
Plain and simple, if you have assets and you have a loved one you trust, you should sign a POA while you still can.
What is a Power of Attorney?
A power of attorney is a legal instrument in which the grantor (also known as the Principal) grants authority to an Agent to sign documents on the Principal’s behalf. The Principal can grant general powers, or can limit the powers to certain types of transactions. Notably, a power of attorney is for transactional matters, for example: real estate transactions, financial institution transactions, governmental benefits, taxes, initiating lawsuits, insurance, and medical records.
The Principal can choose one Agent or multiple. In the case of multiple Agents, the Principal may determine whether those Agents must act unanimously or whether they may take action separately. The Principal can also designate Successor Agents in the event the selected Agents are unable or unwilling to serve.
POAs are not substitutes for a Will. An Agent is not entitled to sign a Will or Trust on behalf of the Principal and the Agent’s powers to handle the Principal’s affairs terminate when the Principal dies.
Protections for the Principal
Granting authority to a loved one to sign your name on a financial instrument is not a decision that should be taken lightly. A Principal should only designate an Agent who the Principal trusts to always act in his or her best interest.
The law does provide some protections for the Principal. The POA must be signed by the Agent where the Agent assumes a fiduciary duty to always act in the Principal’s best interest. Breach of this fiduciary duty can subject an Agent to criminal charges and civil penalties.
The Principal can also revoke the POA whenever he or she wants by giving written notice to the Agent. In the event of a revocation of a POA a Principal would be wise to also file the notice of revocation in the County Clerk’s Office.
Unfortunately, violations of trust can happen. Therefore the grant of authority should only be made to individuals whom you would trust to always take your best interest into account.
Why are POAS recommended?
Planning for the unknown is important to safeguard your property and relieve stress on your loved ones. As many of us are aware, dealing with a person in a state of cognitive decline can be extremely stressful. Adding financial and legal uncertainty to the mix makes a bad situation worse. By signing a POA we can authorize trusted loved ones to manage our assets and better assist in our care.
Having a designated agent through a POA can also be very convenient. It allows someone to handle your affairs if you are out of town or if you are unable to be present for the signing of an important document.
What if a person becomes incapacitated and has not signed a POA?
New York State Law has a provision that allows a loved one to petition for guardianship of an incapacitated person under Article 81 of the Mental Hygiene Law. An Article 81 proceeding has to be commenced in Supreme Court and a guardianship has to be approved by a judge. Once appointed, the Guardian has to file annual reports that are filed with the court.
Because the granting of guardianship in an Article 81 proceeding is an involuntary process (because the incapacitated person cannot consent to guardianship) the court will also appoint an attorney to represent the alleged incapacitated person. While this attorney will look out for the best interests of the incapacitated person, be assured that they will also be looking out for the best interest of the State.
An Article 81 proceeding can be very expensive, especially if the petition is contested. It is also time consuming, nerve racking, and invasive. When possible, it is much better to have an agent in place to act on your behalf in the event you become incapacitated.
Conclusion
Having a POA in place is a great idea if you have loved ones in your life you can trust with the responsibility of being your agent. A POA is relatively cheap and easy (especially when compared to an Article 81 Guardianship).
If you would like to no more, do not hesitate to book an appointment or contact our office!
