One of the most important estate planning tools available to our clients is the Power of Attorney. This document allows the Principal (the client) to appoint an Agent. The Agent has the power to make decisions for the Principal regarding financial matters, business operations, changing or maintaining a place of residence, and planning for government benefits including Medicaid.
Unlike a Will, which takes effect at death, the Power of Attorney is only effective during the Principal’s lifetime. The Agent does not have any ability to act on behalf of the Principal once the Principal dies. If an individual does not have a Power of Attorney and is unable to act, a guardian may be appointed by a Judge. A guardianship proceeding is much more complicated and costly than executing a Power of Attorney.
Clients often ask us to recommend who they should appoint as their Agent or successor Agent. Our best advice is to make sure that your Agent is trustworthy, reliable and dependable. Often, the Agent signs the Power of Attorney at the same time the Principal signs. Once the Agent signs, the Agent has the authority to act on behalf of the Principal, but the Principal may not yet need or want the Agent to act. For this reason, it is especially important that you trust your Agent to act on your behalf only when it is necessary.
The current “statutory” Power of Attorney form is rather long and contains a lot of legal language that is not easy to understand. We use this format because New York State requires that all financial institutions accept it. The format of the Power of Attorney will be changing in June 2021 to simplify the document, you can read about the changes here. The “older” version (signed prior to 2021) will still be valid, however.
If you would like more information on this very important legal document, please do not hesitate to contact us.