Conscientious New Yorkers who understand the importance of estate planning should know various mistakes that have been made in the past that can have a negative impact on even the most comprehensive estate plan. One document that is beneficial is a power of attorney. However, there are certain issues that should be understood before functioning under the belief that the document is airtight. Taking steps to mitigate potential problems can ensure that it covers everything.
With a power of attorney, the person who takes it out is known as the principal. The principal will name an agent who will be empowered to act in the principal’s stead if they are incapacitated. A power of attorney will name someone who can carry out the basics of life, such as paying bills, overseeing assets and making decisions once the principal cannot do so. In a perfect world, this moves forward without a hitch. Unfortunately, this is not a perfect world and problems can crop up.
When the principal becomes incapacitated, the agent must inform financial institutions and others of what has happened. Financial institutions are not automatically obligated to accept the power of attorney. There are standards that each will have with different terms regarding a power of attorney. Many of these entities have rules against accepting a power of attorney that was executed after more than six months have passed. Some want it reaffirmed in writing on an intermittent basis. Still others want certain language in the document. These institutions will have their own departments to deal with a power of attorney and it will then be decided whether to accept it or not.
The agent must also prove that they are the person who is designated as the agent. Basic identifying documents are generally accepted, but more might be requested. This is understandable as identity theft and other acts of fraud are commonplace, but it can still make life difficult for the principal and the agent. It is wise to provide the agent with a copy of the power of attorney and details regarding the principal’s affairs. Garnering information from various institutions about how they view a power of attorney can help. A consolidation of accounts can smooth the process. Being proactive can prevent problems from arising that go beyond the principal becoming incapacitated. This highlights the importance of a legal professional who can help with a power of attorney and any other estate planning document. A lawyer who understands how to help those moving forward with an estate plan and a power of attorney is essential.
Source: Forbes, “7 Big Estate Planning Mistakes – The Power of Attorney Trap,” Bob Carlson, Feb. 23, 2018