One of the most important documents in any estate plan is a Durable Power of Attorney. In all likelihood, you are capable right now of making decisions for yourself, and you hope you will always have that ability. Everyone does. Unfortunately, most people who are now incapacitated hoped that they would be able to handle their own affairs for the duration of their lifetimes. However, no one knows what tomorrow holds, and anyone’s world can be turned upside down in a heartbeat. For more information about how you can plan now for tomorrow’s uncertainty, see the frequently asked questions about Powers of Attorney, below.
Frequently Asked Questions Regarding Powers of Attorney:
- What is a Power of Attorney?
- Do I need a Power of Attorney if my assets are jointly held with my spouse?
- Who should I appoint as my agent under my Power of Attorney?
- What happens if I don’t have a Power of Attorney?
- Can I revoke a power of Attorney?
WHAT IS A POWER OF ATTORNEY?
A Power of Attorney is a document by which you can appoint someone to make financial decisions on your behalf in the event that you cannot make those decisions for yourself. A Power of Attorney is effective during your lifetime, and ceases to have any legal effect immediately upon your death. Most Powers of Attorney are Durable General Powers of Attorney, which means that they continue to be effective even if you lose the capacity to understand the document and how it empowers the person you appoint as your Power of Attorney (i.e. attorney-in-fact). As a general rule, most Powers of Attorney authorize someone to deposit and withdraw funds from your accounts, borrow money in your name, enter into contracts on your behalf, handle any tax issues that may affect you, etc. However, the authority given to your attorney-in-fact is created by the Power of Attorney, and therefore, that authority can be as broad or as limited as the situation may require. The Durable Power of Attorney is tremendously important, and the consequences of not having executed a Power of Attorney can be substantial and far-reaching. (See What happens if I don’t have a Power of Attorney?, below.)
Although a Power of Attorney is a very powerful document, the person named as your attorney-in-fact is charged with the responsibility of acting on your behalf. The attorney-in-fact has the fiduciary obligation to act in your best interests, and can be held liable if he or she acts on his or her own behalf to your detriment.
DO I NEED A POWER OF ATTORNEY IF MY ASSETS ARE JOINTLY HELD WITH MY SPOUSE?
Definitely. First and foremost, some actions on behalf of an incapacitated adult cannot be undertaken without a Power of Attorney. For example, drawing on individual retirement accounts – just because your spouse is named beneficiary at your death does not mean that your spouse has the authority to access the funds in your retirement account on your behalf (e.g. to pay for your long-term care). Another example where a Power of Attorney is critical even as between a married couple is real estate. If you become incapacitated and your spouse wants to sell your home to move with you into independent or assisted living, your spouse cannot sell the real property by himself or herself – someone has to be able to sign for the incapacitated spouse.
Also, many couples age together, and consequently experience cognitive decline together. If you and your spouse are both incapacitated, then the fact that you are joint owners of your bank accounts does nothing to help your loved ones pay for your care. By signing a Power of Attorney, you can fully empower your spouse to take all appropriate action on your behalf, and you can name a successor agent to administer your assets for your benefit if your spouse is unable to do so for some reason.
WHO SHOULD I APPOINT AS MY AGENT UNDER MY POWER OF ATTORNEY?
Many Powers of Attorney are effective immediately upon their execution, and because most people want their attorney-in-fact to be equipped to handle a variety of financial situations, many Powers of Attorney are also broad in scope. Therefore, you want the person named as your attorney in fact to be someone you trust to act in your best interests at a time when you will be unable to act for yourself. Trust is the most important factor in naming your attorney-in-fact. In addition to someone you trust, it is best if you are able to have an agent that manages his or her own property effectively and who has a history of sound decision-making.
WHAT HAPPENS IF I DON’T HAVE A POWER OF ATTORNEY?
The consequences of failing to execute a Power of Attorney while you have the ability to do so can be devastating for you and those about whom you care the most. There are processes in Virginia by which someone can petition the court to have you declared incapacitated if you can no longer make decisions affecting your person and/or your finances. (See Guardianships and Conservatorships.) These processes cost thousands of dollars (costs which are typically born by your assets), and are inevitably extremely painful for the family and friends who have to seek legal permission to take action on behalf of their incapacitated loved one. Nonetheless, they are essential for those who need the authority to act on behalf of their incapacitated loved ones. Those proceedings, however, can be avoided entirely by having a Durable Power of Attorney and an Advance Medical Directive in place.
Additionally, if you fail to execute a Power of Attorney, you forfeit the right to decide who will have the authority to act on your behalf, and that is an invaluable right. We can help you take the steps that may save thousands of your hard-earned dollars, and save your loved ones from a process that, though it serves an essential purpose, can create a great deal of emotional distress for you and for them. Click here to arrange an appointment with an attorney in order to have the peace of mind that this type of estate planning affords.
CAN I REVOKE A POWER OF ATTORNEY?
As long as you have capacity to enter into a contract, you have the capacity to execute or revoke a Power of Attorney.
If you have previously executed a Power of Attorney, it is generally advisable to review that document every three to five years with an attorney. This is to ensure that the scope of the Power of Attorney is still sufficient to meet your needs, and that any changes in your circumstances (including your decision regarding who should serve as your attorney-in-fact) are reflected in your Power of Attorney.