“Hi, I need to get a Power of Attorney for my dad.” You would be surprised how many times I get that call. A daughter or son calls and wants me to prepare a “simple” power of attorney for their parent. But before anything else, I try to find out why the parent isn’t calling. Many times it is just that Mom or Dad asked their child to handle things.
But, there are times when the child tells me that Dad can’t handle his finances anymore. Maybe the parent has advanced dementia. I have no idea. I try to explain that you don’t “get” a Power of Attorney; the person must “give” it to you.
Even in its simplest form, a power of attorney is a very powerful document. It gives the agent the ability to have access and control over your financial affairs. The one thing it does not give the agent is ownership of your assets. That only happens if you add them to the asset as a joint owner. Adding them to the asset as a beneficiary is great, but that only becomes effective when you die. It gives that person absolutely no power over that asset as long as you’re alive.
Keep in mind that the default Power of Attorney in New York is what used to be called a Durable Power of Attorney. This means that it becomes effective the moment you and at least one agent sign it. The agent retains the power even if you become incapacitated in the future. As long as you’re alive (and haven’t physically revoked the power), the agent still has the authority to act.
The Power of Attorney is broken up into two sections: the “Statutory Short Form” and an optional “Statutory Gift Rider.” The first section identifies your agents and their overall powers. You can name one agent or you can name several. If more than one is named, you then have the option of having them act jointly or allowing them to act separately. Unless there’s a very good reason for it, I always suggest that the agents be able to act separately as many banks will not accept a Power of Attorney that forces the agents to act jointly. They don’t want the responsibility of insuring that the agents always acted together.
You also have the ability to appoint primary agents and then successor agents. Again, if there is more than one successor agent, you have the option of joint or separate. The statute says that the successor agent takes over if the primary agent is “unable or unwilling to serve.” In the bank’s eyes, that means incapacitated or dead.
Further, you have the ability to appoint a monitor. This is someone who monitors the agent but does not have any power on his own. I’m not sure why you would appoint a monitor. If you don’t trust the agent, maybe you should be appointing someone else.
The other main aspect of the first section is that it lays out the powers of the agent. These can be limiting such as to handle signing papers at a sale of a house closing. But normally, for estate planning purposes, we try to make them as expansive as possible. This means adding many modifications so that the agent can step into your shoes, if necessary, and handle any financial matter in the same manner as you would have.
The second section is the Gift Rider. Without this the agent would be limited to making only up to $500 cash gifts per year. The Rider allows the agent to at least make gifts up to the Federal Gift Tax Exclusion level (currently $14,000) per person per year. For estate planning purposes, the Rider can be further modified to any other limit or no limit. This would allow the transferring of assets for long term care planning purposes.
Overall, the Power of Attorney can be a very powerful document. In the right agent’s hands it can save you thousands of dollars as the agent would be acting in your best interests to continue to protect your assets. But be wary: in the wrong hands, where the agent breaks his fiduciary duty to act in your best interest, it can become very costly. I am not saying to not complete a Power of Attorney. I am just saying to be careful of who you choose as your agent.