It is estimated that only 25 to 30 percent of U.S. households have estate planning documents in place. This means that most people do not have documentation in place to address how they wish their financial affairs to be handled during their lifetime if they are not able to do so on their own. This blog will address Powers of Attorney for Assets.
A Power of Attorney for Assets (POA-Assets) allows you to designate someone else to step into your shoes and continue to handle your financial affairs when you are no longer able to do so on your own. Depending on how it is drafted, the POA-Assets can allow someone to assist you with your financial affairs if you just care to transfer that duty to someone else or step in and keep your financial affairs in order if you are not capable of doing so on your own. However, who you designate as your agent under the POA-Assets and the powers that you convey to that person must be carefully considered.
When individuals are married, or in long-term relationships, they often designate their spouse, partner, or competent adult child as their agent under the POA-Assets. If that is the case, you must also consider what types of powers you are conveying to the designated person. Some practitioners have a template POA-Assets and fill in the names of the designated person without giving serious thought to what powers are being conveyed to the designated person. Care must be taken to understand the overall relationship between the person creating the POA-Assets and the designated individual. The powers under the POA–Assets must be tailored to the situation.
For example, many spouses or partners have joint assets. Therefore, each joint owner has the ability to access those assets now, and that access is not dependent on the existence of a Power of Attorney. However, for assets in a person’s name, or retirement accounts (IRAs, 401ks, qualified stock options, and the like), a POA-Assets can be very important in continuing to manage the individual’s assets and make sure they exercise any required withdrawals or elections.
If a POA-Assets is drafted very broadly, the person drafting and preparing the form must make sure that there are proper safeguards in place so as to eliminate, to the greatest extent possible, the potential for the abuse of the powers conveyed. Far too often, there are stories about elderly people losing their assets or their home because someone misused the powers under a POA-Assets.
There are a number of forms that a POA-Assets can take. One is that it is effective immediately, and once it is signed, the designated person can take the document to a bank or investment house and the like and act as if he or she was the person who owned the account. That type of document should only be used when the designated person is a spouse, family member or long-time advisor, and they understand that they are responsible for properly caring for the individual’s finances.
There is also a “springing” POA-Assets. This document is valid once it is signed, but the designated person cannot act until one or more physicians certifies in writing that the person who created the POA-Assets is no longer able to carry out and handle their own personal affairs. This allows protection and reduces the likelihood of abuse while the person is still competent, but care must still be taken to make sure that the powers are tailored to the situation.
If you have any questions regarding a Power of Attorney for Assets, please contact a member of our Estate Practice Group.