Power of Attorney Lawyer in New York City
In estate planning, every family should generally have the following documents:
- Living trust
- Advance directive
- List of beneficiary designations
- Standby guardianship (for those with minor children)
In addition to these essential devices, there is also one other important document: the Power of Attorney (POA). Wills, trusts, and beneficiary designations govern what happens to your estate (and/or minor children) when you pass away. Advanced directives, standby guardianship, and POAs operate while you are alive.
How Does a Power of Attorney Work?
In a POA, the principal (i.e. whoever creates it) grants legal agency to the designated agent to make decisions regarding the principal’s financial assets.
Examples of such assets include:
- Real estate
- Bank accounts
- Retirement and investment accounts
- High-value personal possessions (e.g. jewelry)
On your behalf, your agent can enter negotiations, conduct transactions, and create contracts regarding your assets. Unlike advanced directives, living wills, and healthcare proxies, the POA does not give the agent authority to make decisions regarding your medical wellbeing. It only governs your assets.
A POA can be granted at any time. While incapacitation is not a requirement for the POA to take effect, the POA can be a highly useful tool in emergency situations where you can’t manage your own finances or access them for your family’s care. It can also help those who simply prefer not to manage their financial assets on their own, designating someone with more expertise, time, and inclination do so on their behalf.
Durable vs. Nondurable POA
A nondurable POA is typically limited in time or circumstances. An example would be to make your trusted friend your agent in a real estate transaction that you cannot attend because you’re out of the country or otherwise unavailable. Nondurable POAs are limited in scope, standing on the specifics of time periods and/or the completion of a transaction. They are not “all-encompassing” like durable POAs.
Additionally, a nondurable POA cannot be used in a situation where the principal is incapacitated. If you have a nondurable POA and become incapacitated, the POA is rendered void.
This is where the durable POA comes into play. Unless stated otherwise in the specific document, the agent named by a durable POA can make financial decisions for you before AND after you are incapacitated, whether temporarily or permanently. Once you become incapacitated, neither you nor your loved ones will be able to reverse or revoke this POA. This is why designating a dependable agent is critical.
Choosing Your POA Agent: Trust Is Key
“Agency” is a longstanding legal concept and can be a powerful tool when used properly. When abused, it can bind you to contracts or transactions without your knowing, thereby putting your financial assets and stability at risk.
At its broadest, a POA can be all-encompassing in the legal decision-making power it gives an agent. When you grant someone POA, you are allowing them to step into your shoes and take over all decision-making regarding your financial assets.
When properly constructed, however, a POA can give someone you trust the authority to deal with all your financial matters, leaving you (and yours) with peace of mind during a challenging time. As with most legal documents, you can also tailor the POA such that the agent’s decision-making power is limited to specific financial situations (in which case, it would be prudent to consult your financial advisor together with your attorney).
Our power of attorney lawyer can guide and empower you with the knowledge you need to make informed decisions. We can also warn you of the problematic situations that arise when principals fail to thoroughly consider all options. That said, you must decide for yourself what best serves your goals and protects your family. While we cannot tell you who to pick as your agent, we can tell you what to look for in the people you are considering.
Co-Agents and Back-up (“Successor”) Agents
In some cases, the person you trust to be your agent may lack comfort with certain financial matters. Fortunately, you can divvy up agent responsibilities among two or more agents, provided you make this intention clear in your POA document. If you wish to allow each agent to act separately, then the POA must state this as well. Words reflect intentions, so the specifics of your POA will guide a court (if there is controversy) as to who is/was allowed to do what.
Spouses & Other Joint Account Holders
If you and your spouse or partner share a bank account that is used to pay all expenses, they do not require a POA to access the funds. Whether your partner can access your other assets as well depends on a variety of factors.
You can’t, for example, make a spouse or other person a joint-owner of a 401k or IRA (IRS rules prohibit this). A POA, however, can be a workaround, granting your spouse the authority to make decisions on accounts where you are not joint owners. You can do the same with anyone else whom you choose to be your Agent (e.g. sibling, trusted friend, etc.). Some financial institutions have their own standardized forms for POA situations, but it’s best to run them by an attorney before utilizing such forms.
Formalities: Notary Public & Written Notice of Revocation
Your POA holds no legal weight unless it’s properly witnessed by a Notary Public. Having lay witnesses present when you and your agent(s) sign it does not suffice. Again, your POA document must contain specific language as set out in New York legislation, whether you use the statutory short form or your own document. Both you and your agent(s) must sign the POA document before a Notary Public, who will append her stamp and signature to the document.
Under New York law, a POA extinguishes upon written notice of revocation by the principal to the agent (s) or by the principal’s demise (and not by incapacity, unless expressly stated in the POA document). You can revoke or terminate your POA at any time and for any reason, so long as you are of sound mind. Such revocation or termination must be done in writing, and it must be sent to your agent and any third-parties (e.g. financial institutions) that are impacted by the POA.
If you are no longer of sound mind, a court can remove an agent for acting improperly. This, however, will involve your family or friends having to engage an attorney, and the situation is likely to be acrimonious and difficult. Your family or friends will have to prove to the court that the agent did not act in your best interests (e.g. accessing your funds for their own interests or willfully mismanaging them). Litigation is never pleasant and can be costly, time-consuming, and, above all, stressful for your loved ones.
Let Us Help You Create Your Safety Net
A POA is a powerful legal tool that should only be set up when you’re sure the agent(s) you pick can (and will) act in your best interests. For most families, a POA is not difficult to set up, so long as you have qualified legal guidance.
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