Estate Planning involves a combination of various legal instruments, such as Wills, Trusts, Powers of Attorney, and Living Wills, as well as Lifetime Transfers, Gifts, and Beneficiary Designations.
Overview of a Power of Attorney
By their nature, emergencies occur suddenly and without warning. If you find yourself in an emergency that prevents you from taking care of your affairs and assets, having a Power of Attorney will be a great benefit. The purpose of a Power of Attorney is to appoint another individual as being responsible for your assets when you become disabled or incapacitated. Of course, there may be other reasons when a Power of Attorney would be beneficial, apart from disability or incapacity, such as being out of the country for an extended period of time. This person, known as your agent, is usually a trusted member of your immediate family, but it can also be a can be a trustworthy and loyal close friend.
Under most Powers of Attorney, agents are granted a broad range of powers. Thy typically includes performing tasks like writing checks, making deposits, selecting investments, and collecting returns on your behalf. They may be able to sell your property, including your house or vehicle. They may run your business and make legal decisions. All this is done on your behalf and for your benefit.
Types of Power of Attorney
Powers of Attorney can be generally broken into four categories or types. They are:
1. General Power of Attorney is one in which the agent is granted a broad, general range of powers, and handles your financial and your medical interests, as well as other areas.
2. Limited Power of Attorney, on the other hand, is limited, either in scope or duration, or both.
3. Durable Powers of Attorney are those that continue to be effective even after the principal (you) become incapacitated or disabled. In Pennsylvania, all Powers of Attorney are now durable by default, so you would have to specify if you wanted it to be otherwise.
4. Springing Power of Attorney, which comes into effect (or “springs”) when you become incapacitated, and when this incapacitation is defined clearly beforehand.
The type of Power of Attorney that is right for you will be determined based on a variety factors and your particular circumstances. For your Power of Attorney, it likely will fall under more than one of these categories. Keep in mind these Powers of Attorney are general descriptions, as you have the right to specify the level of authority you want your agent(s) to have, as well as the duration.
Selecting an Agent
Carefully choosing your agent is essential to a Power of Attorney. You are going to need someone that is reliable and trustworthy, as you are giving this person potentially immense power over your estate. You most likely will want someone whose decisions are in line with your own way of thinking. A good agent will share your same viewpoint of the area of affairs over which they will have power. If someone does not have a similar point of view in regards to finance as you, they will likely not be a good agent to handle your finances. The same is true for medical decisions, as well as other areas covered by a Power of Attorney.
Often the first choice for a Power of Attorney is one’s spouse. If your spouse is in good health and you believe you can trust them to handle your estate, then they will likely be a good choice. However, if you do not feel that you can trust them to handle your finances, medical decisions, etc., or they are not in good health, your spouse will not be an appropriate choice and you should consider someone else.
If you find yourself ruling out your spouse as your Power of Attorney, when pondering your alternatives, you will want to consider their geographic proximity to you. Much of the responsibility of an agent requires them to be fairly close to you, as they will be handling bank transactions or possibly meeting with doctors. Thus, your sister that lives in Texas might not be the best choice. Even if you decide you want to name your spouse as your Power of Attorney agent, you should still consider naming a substitute agent in case your spouse becomes incapacitated or passes away. It may be beneficial to name multiple agents that share powers, thus better insuring someone will be available to serve as agent.
Alternatively, you could name multiple agents, each with their own sphere of power. For instance, suppose you have two children, one is an accountant and the other is a physician. You could designate your accountant child as your financial agent and your physician child as your medical agent.
Michael J. Girardi
Estate Administration is a process that involves a wide range of duties on behalf of the Executor or Administrator. These responsibilities include collecting, valuing, and protecting the estate’s assets, making payments to creditors and receiving collections from debtors, the payment of various taxes, and the distribution of the assets to the heirs and beneficiaries of the estate.
To learn more about Estate Administration, check out the resources below, or contact us to schedule a free consultation.