Why You Should Have a Property Power of Attorney
- Created: Friday, 03 March 2017 08:00
A durable power of attorney for property and finances, (commonly known as a property power of attorney), is a legal instrument whereby an individual may authorize another person to manage his or her property and financial affairs.
In some cases an individual may give this power of attorney to another person (referred to as “an agent”) because he or she plans to be out of the country or otherwise unavailable to handle his or her financial affairs. These powers of attorney become effective at the time of signature, or other designated dates, and remain in effect for a specified period of time, or until the principal terminates that authorization.
More frequently an individual may execute a property power of attorney as part of his or her estate planning and designate an agent to manage his or her financial affairs only in the event that the principal becomes disabled. At that time, these powers of attorney will then stay in effect until the principal recovers from an illness or disability, or until the principal’s death.
Power of attorney for property allows the agent to manage the assets which are titled in the principal’s name such as checking accounts, investment accounts, retirement accounts, real estate, vehicles, or virtually any other asset which may otherwise be owned or controlled by the principal. For instance, if the principal suffers a heart attack and is unable to sign checks, make distribution elections regarding her IRA, or sell an automobile or home, with a power of attorney the agent may step in and write those checks, make investment decisions or sell real or personal property on behalf of the principal.
Agents have significant authority as well as responsibility when serving in this role. Consequently the principal should carefully consider the designation of an individual to serve as his or her agent. Similarly, the agent should fully understand the responsibility that he or she may be required to undertake and the fiduciary responsibility that the agent has to act solely in the best interest of the principal.
In our firm, we believe that a power of attorney to deal with pre-death matters in the event of a client’s disability is an important part of clients’ estate planning and every client should adopt a property power of attorney as part of their planning. Even if a client has a living trust, which is designed to hold title to the majority of his assets and which will provide for a successor trustee to manage those trust assets in the event of the client’s disability, a property power of attorney is still important because not all assets may be held by or titled to a living trust. For instance, an individual retirement account must be held in the name of an individual and consequently is not subject to control by the successor trustee. Similarly, most clients retain a personal checking account as well as his or her automobile in their individual name. Upon their disability the agent under the power of attorney may elect to sell the automobile and either write checks from the checking account or close out the account and transfer the funds into the trust so the successor trustee may then pay bills for the client’s expenses.