Simply put, estate planning is the process of putting your affairs in order while alive and well in preparation for the possibility of incapacity and certain death. Arguably not one of the most compelling topics but the lack of estate planning is often what many clients lose sleep over more than anything else.
The essential documents in any estate plan include a will, advance medical directive, living will, and a power of attorney. A revocable trust along with other trusts may complement your plan depending on the size and complexity of your estate. It goes without saying, the documents and specific directives are drafted by, and in consultation with, a competent trust and estate attorney.
This post will review some key components of the Power of Attorney document.
A Power of Attorney (POA) is a legal document electing someone else to step in and handle your financial decisions and actions on your behalf. This may be done as a matter of convenience but is usually done considering the possibility of incapacity. Therefore, it is important to name as “agent” someone whom you trust, usually a spouse, close family member, or friend, to handle these types of decisions.
There are a few key definitions to understand when discussing a POA. A “durable” POA means the agent can act even if the principal becomes incapacitated. A “springing” POA comes into effect upon the occurrence of some future event, usually incapacity. All POA agent appointments terminate at the death of the principal – this is when a successor trustee or executor takes over the affairs of the decedent.
Recently enacted laws in North Carolina (January 2018) and South Carolina (January 2017) have adopted the Uniform Power of Attorney Act. Prior law still governs and upholds existing documents executed prior to the date of enactment but documents drafted prior to the change and never executed will need to be updated. The change was made to primarily to enhance the effectiveness but also to identify and redress abuse by the agent.
Under the old POA law one had to specify in clear terms that it was durable. Additionally, in North Carolina a durable POA had to be recorded with the register of deeds to be valid. The new law assumes the POA is durable unless stated otherwise in the document. Except for certain real estate transactions, it is not necessary to register the durable POA with the register of deeds.
The new laws require that specific powers granted be explicitly stated in the POA. If this express authority is not granted it could hinder the agent’s ability to do certain transactions such as making gifts, changing beneficiaries, delegate authority or access to safe deposit boxes. It is important you review the list of specific powers.
If you decide to name multiple agents, know that under the new law each agent can act independently. It is important to state whether the agents should act jointly. Also, creating a new POA does not revoke a formally appointed agent or power of attorney. The new POA must specifically state the intent to revoke the prior POA.
This information is certainly not exhaustive, and an attorney should be consulted before any documents are executed. Having up to date documents often ensures continuity should you become incapacitated for any period. This is a good time to review your documents and make sure they still fulfill your intent. Please take the time to discuss this topic with your advisor and attorney.