The Importance of a Financial Power Of Attorney
May 11, 2020
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POAs are not only for the elderly.Mental incapacity can result from severe accidents or health conditions unrelated to age. Additionally, parents of young adults, especially college students, may want to encourage their child to have a POA. Being the parent of a legal adult does not allow you to act for that child as you did when they were a minor.
Many married couples assume that because they are married they do not need POAs. That is true for most, but not all, jointly owned assets. For example, to sell real estate, both spouses must sign the deed, or have it signed by an Agent under a valid POA. Also, most married couples have assets which are owned individually, such as IRAs, 401(k)s, life insurance, or separate bank or investment accounts. Without a POA, a spouse has no legal rights regarding those assets owned solely by their spouse. Generally, financial or insurance companies will not provide any information to the spouse. Thus, even married couples need POAs.
Most people want and, generally, good planning dictates, their Agent to have the same power to make financial decisions as they have, so it is generally a good idea to give the broadest possible powers to the Agent in the POA. This includes the powers necessary to do financial planning if the person creating the power needs to go into a nursing home. This is important because Pennsylvania law says that powers must be specifically granted to ones Agent in the POA; if a power is not specifically listed, the law presumes that the person creating the power did not intend to give it.
A durable POA remains effective even if the creator becomes incapacitated or incompetent. Pennsylvania law presumes that all POAs are durable, unless the document says otherwise. Most POAs are effective immediately upon signing, although it is possible to create a POA that only becomes effective when one or more doctors certify that the person is unable to make financial decisions. However, those are generally not recommended because of the difficulties involved in getting the medical certification, and the risk that a bank will want additional proof of incapacity. Also, often fully competent elderly people simply want the Agent to assist with their finances.
Importantly, the person creating the POA must have the legal capacity to sign. This means that at a minimum he (she) must understand that he (she) is giving the power to make financial decisions to another person, and must be able to identify that person. Too often attorneys receive calls saying that a loved one had a stroke yesterday and they need a POA. When asked if the person is able to understand the POA, the callers say, Oh no! He (she) doesnt understand anything. Unfortunately, that person waited too long to get a POA.
Thus, a properly drafted Durable Power of Attorney is a critical component of any estate planning, and is overlooked at ones peril.
Editors Note: This article was contributed by William H Poole, Jr. Esq., attorney at Bellomo & Associates LLC a full-service estate and trust law firm.
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