Why Should You Have a Power-Of-Attorney?
The "durable power-of-attorney" is one of the most useful and important planning tools that we can recommend to my clients, not only for estate planning, but also for Medicaid and public benefit planning.
When a person (the principal) signs a power-of-attorney, he/she gives another person (the agent) the power to act in his/her place and on his/her behalf in managing his/her assets and affairs. The agent's powers may be broad so as to include almost any act which the principal might have performed. It should be noted, that in general, acts which are inherently testamentary in nature, such as the authority to make or revoke a will, may not be performed by an agent under a power-of-attorney.
A power-of-attorney can be either a "general" power-of-attorney, where the agent may perform almost any act the principal might have performed regarding the financial management of his/her affairs, or a "limited" power-of-attorney where the agent has one or more specific powers, such as the power to sell a particular property to a particular purchaser at a particular time. A single principal may name one or more agents who can be authorized to act either "jointly" or "severally" (alone without the signature of the other agent).
The "durable" power-of-attorney is unlike the ordinary power-of-attorney which becomes inoperative upon the incapacity of the principal. The durable power-of-attorney, provides that those powers granted to the agent shall not be affected by the later disability or incapacity of the principal or by the lapse of time.
Most powers-of-attorney become effective immediately upon execution by the principal. Some principals are wary about giving a currently exercisable power-of-attorney to the agent. Kentucky and Ohio allow a durable power-of-attorney to be drafted in such a way that it becomes effective only upon the principal's "disability". Such a power-of-attorney is referred to as a "springing" powerof-attorney, signed when the principal has capacity and not effective until the occurrence of a triggering event such as the onset of disability of the principal. The primary disadvantage of the use of the springing durable power is that because its operation is only triggered by the principal's disability, the occurrence of the event will have to be conclusively established to the third person in order to have such person accept the authority of the agent. The document, therefore, should contain a clear definition of the term "disability".
Drafting a Power-of-Attorney
In Kentucky and Ohio, the principal, in planning for asset management, should consider granting to the agent other important specific powers in addition to those enumerated by statute and found on the conventional pre-printed form power-of-attorney. Unless such additional and specific powers are drafted into the document, the agent will have no authority to act. The following are some specific powers that we recommend the principal consider including in the power-of-attorney:
In drafting powers-of-attorney, care should be given to confer powers with as much specificity as possible in order to avoid the possibility of a court construing a specific omission as an intent to fail to grant that specific power. Such an adverse finding could be to the detriment of the principal's assets.
Advantages of Power-of-Attorney for the Seriously-Ill
The use of a power-of-attorney for the management of the assets of a seriously-ill or disabled person has several advantages. It is especially useful in situations where the disabled person's assets may be modest and, accordingly, do not warrant the greater expense associated with other planning techniques such as trusts, conservatorships, committeeships or guardianships.
The greatest advantage of the durable power-of-attorney is that it remains effective after the principal's incapacity. The agent can act immediately, upon the principal's incapacity, to manage his/her assets or to take various emergency measures without initiating costly and time-consuming court guardianship proceedings to attain court authorization for such transactions.
The durable power-of-attorney is also a useful planning tool for married couples where property is jointly owned. When one spouse becomes incapacitated, the other acting as the agent, can avoid a court proceeding and act promptly in situations where, although assets are held jointly, one spouse cannot act alone to sell, transfer or refinance property or registered securities without having to obtain the consent of the other joint owner.
Care should be taken regarding the formalities involved in signing a durable power-of-attorney. We recommend that it be signed in front of a witness and notary.
All powers-of-attorney ceases to have effect upon the death of the principal, upon the revocation by the principal, assuming the principal has the requisite capacity to do so, or upon the court order. If the principal revokes the power-of-attorney, such revocation may either be in writing or by the principal conducting one's self inconsistent with the power (e.g., destroying the power-of-attorney document). Lastly, a power-of-attorney can terminate if a specified time limit is specified in the document itself or if a specific event as set forth in the document has occurred.
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