Understanding What it Means to Be Named Power of Attorney

You've Been Named Power of Attorney; Now What?

Estate planning attorneys receive this type of telephone call routinely: “My father has had a stroke, he’s in the hospital, he has stabilized but the doctors are saying he is too weak to go home, they want him to go to a nursing home for rehabilitation, and I am being asked for my father's asset information; is there something I should be doing so everything he has doesn't go to the nursing home?"  Or, “My mother fell and broke her hip, she went to the hospital and then to a nursing home for rehab, but the doctors are saying she is not improving and requires 24 hour care.  They want me to choose a nursing home off a list they gave me; but I am not familiar with any of them, and don’t nursing homes cost a fortune?  Will my mother lose everything she has?"  One of the first questions the attorney asks is, “Does your loved one have a Power of Attorney?”  If the answer is no, and assuming the loved one has mental capacity, that is the first order of business!  Having power of attorney will allow access to funds, payment of bills, completion of paperwork, and most importantly, the ability to enter into additional planning to protect the loved one's assets. 

“I’ve been named Power of Attorney.”  Let’s clarify the lingo.  You have been appointed by a person (the principal) as his or her agent, in a Power of Attorney document, and the appointment gives you power of attorney. 

The principal has authorized you to handle his or her affairs (not health care decision-making, that is a different document) and has either specified which affairs or has authorized “all of the above.”  The principal may have granted you unlimited gifting authority in a Statutory Gifts Rider signed at the same time as the Power of Attorney document.  The principal may have signed a Power of Attorney document that takes effect immediately, or that “springs into effect” upon the principal’s proven inability to handle his or her affairs.  Most Power of Attorney documents are durable, meaning if the principal becomes incapacitated after signing, the power of attorney remains effective. 

For estate planning purposes, our usual recommendation is that clients sign a durable power of attorney document that takes effect immediately and appoints a trusted individual as agent to handle all affairs.  Then, should the principal become incapacitated (or is simply unavailable), the agent has the authority right away to access funds, pay bills and do any other appropriate planning for the principal.  Often, spouses will appoint each other along with an adult child who could step in if both parents required assistance. 

An agent has a fiduciary relationship with the principal, meaning the agent must act according to the principal’s instructions or, in the absence of instructions, in the best interest of the principal; keep the principal’s property separate from his or her own; and keep accurate records.  The agent may be subject to liability for actions or inactions that violate this duty.

The appointment ceases at the principal’s death.  After death, it is the representative (i.e., Executor, Administrator) of the principal’s estate who has authority over the decedent’s property. 

Without power of attorney, if you need legal authority to handle your loved one's affairs, you must commence a proceeding in the court, to be appointed Guardian of the property.  This is time consuming, which means it may result in missed planning opportunities, and will be expensive.

So, you have been appointed as agent under durable power of attorney effective immediately, now what?  Keep the document in a safe place and step in for the principal immediately if asked or when needed.  In the event the principal is your loved one, experiencing serious health challenges and possibly a move to a facility, your authority will be essential, to handle routine matters, and to do "crisis planning" to protect the principal's wealth.

Powers of attorney are simple to create, should be created under the guidance of a knowledgeable attorney, and give people peace of mind, the thought that if there is a need for assistance, a trusted person will have the authority to provide it.

If you would like further information, please contact your Woods Oviatt Gilman attorney.

Christen C. Bruu, Esq. is an Associate in the firm’s Family Wealth and Estate Planning Department.  She can be reached at 585-987-2895 or Cbruu@woodsoviatt.com