Power of Attorney

A general durable power of attorney is an important estate planning and elder law planning tool.   A power of attorney allows the attorney-in-fact, also6291331_s power of attorney referred to as the agent, to manage the legal and financial affairs of the principal (the person making the power of attorney designation).  The agent’s authority comes from state law and from the power of attorney document that describes the agent’s duties and powers.  Typically the agent would be able to pay the principal’s bills, take care of banking, manage investments, pay insurance premiums, make claims for benefits under health insurance or other programs, collect money owed to the principal and apply for government or other benefits.  The principal can customize the power of attorney document to meet his or her specific needs.

One power that can prove particularly helpful for estate planning and elder law planning is the agent’s ability to create a trust for the benefit of the principal.   However, this power is not automatically included in a general durable power of attorney.  If the principal wants the agent to have the power to create a trust, the power must be expressly stated in the power of attorney document.

A recent appellate court case from Kentucky illustrates this point.  In Dishman v. Dougherty, a case involving a very complex set of facts, the wife as the agent under a power of attorney created a trust for her husband.  In that case, the court held that

“in order for an attorney-in-fact to create a trust pursuant to a POA (power of attorney), this authority must be expressly provided for in the instrument if it contains a specific provision related to trusts.”

The court found that the instrument in question only permitted the agent to “[c]onvey any real or personal property to the Trustee of any trust agreement between me and said Trustee and entered into either before or after the date of this instrument[.]”   That language, which is the usual language included in many power of attorney documents, only allows the agent  to convey property into a trust but does not permit the agent to create a new trust.  In Dishman v. Dougherty the court held that the trust created by the wife was void from inception.

If you are creating a power of attorney you should consider whether to give your agent the power to create trusts, and what other specific powers, if any, should be included in the document.

Getting Legal Help

The power of attorney is an important planning tool.  If you need help preparing a power of attorney or if you are the agent under the power of attorney and need guidance in your role as the agent contact experienced Estate Planning and Probate Attorney, Elga A Goodman. Contact us today at 973-841-5111.

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One important aspect of estate planning involves the Power of Attorney (POA).  Much confusion abounds regarding when POAs stop being in effect. We hope the following discussion will help clarify this issue.

Generally speaking, the POA is a legal document whereby one person (the principal) authorizes another person (the agent) to act on the principal’s behalf while the principal is alive.  Typically, POAs involve matters of financial management.  POAs can be written to give the agent broad, general powers or limited powers for specific situations only.  The POA is frequently used in the event of a principal’s illness or disability, or when the principal can’t be present to sign necessary legal documents for financial transactions.

So, for example, Mary Jones has a POA designating her son, Michael. as her agent.  Her specific POA gives her son broad powers.  Mary becomes disabled and needs to move into a nursing home.  Some of her assets must be sold to finance her new expenses.  As her agent, among other things, Michael proceeds to

– sign the contract with the nursing home.

– sell Mary’s home.

– sell some of her stocks and bonds.

– pay all of Mary’s bills on a monthly basis.

– pay Mary’s federal and state taxes.

Two years later, Mary passes away.  As noted above, a POA is only in effect while the principal is alive.  Upon her death, Mary’s POA, designating Michael as her agent, ceases to be in effect.  

Now that Mary is deceased, her estate will become the responsibility of the Executor (designated by Mary in her Will, or, if no Executor was named, then appointed by the surrogate court).  We will discuss the role of the Executor in a future article.

The important point here to remember is that an agent’s POA authority stops once the principal is deceased!

Getting Legal Help:

Experienced Estate Planning Attorney, Elga A. Goodman, can help you understand the various aspects of estate planning and can work with you to create the right plan for you and your family.  Contact us today at 973-841-5111.

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