By: Edward Vinhateiro, Trusts & Estates Counsel
A staple of a foundational estate plan, whether it be a will based plan or a revocable living trust based plan, is a durable general power of attorney. Through the power of attorney form, an agent, known as an attorney-in-fact, is appointed and authorized to conduct the financial affairs for the principal in times of incapacity, travel or other circumstances where he or she cannot attend to the matter personally. A power of attorney may specifically list the powers and authority of the agent or it may refer to and incorporate a state statute that delineates the powers granted to an agent. The authority may take effect immediately or upon some future specified event and, in the case of a “durable” power, will remain effective during the incapacity of the principal who granted the authority. Power of attorney forms are powerful and useful planning tools for elderly individuals, individuals who may suffer a temporary incapacity or individuals with a specific need to delegate their authority over a transaction. A power of attorney, however, may not be used to produce a new will or a codicil to a will for the principal.
Unfortunately, a few practical limitations limit the effectiveness of a general power of attorney. One such limitation results from the reluctance of a third party to honor the power. During the past decade, many news outlets have reported the difficulties many individuals have encountered in trying to transact business for an elderly loved ones with national financial institutions under general or statutory powers of attorney. Quite often a bank or investment company will require the principal use their own power of attorney form to nominate an agent rather than a general power or statutory form. Another issue an attorney-in-fact may encounter is the claim by the bank or other third party the power has become stale, meaning that too much time has elapsed since the execution of the document and the current attempt to transact business even if the form is still legally valid. Also, a statutory form power of attorney executed in one state may not be effective in another state due to a lack of familiarity with its incorporated powers.
Other limitations may reside within the language of the power of attorney form itself. For example, in some jurisdictions a transaction involving real estate may require specific authority and be in a form suitable to be recorded in the land records. In Georgia, an agent’s authority to amend the principal’s living trust must be specifically articulated in the form (as well as in the trust agreement) for such an amendment to be valid. In this regard, not all power of attorney forms are the equivalent and careful consideration should be given to the scope and use of the power given for your individual needs.
We recommend all of our clients review and update their powers of attorney frequently and to ask their financial institutions about its effectiveness in case of their incapacity. Additionally, if a client will be residing in another state for six months or more, we encourage the client to execute a new power of attorney in that jurisdiction. It may seem burdensome to test the limits of the power of attorney form when it is executed, but it avoids the issues created when an attorney-in-fact needs to act on your behalf only to find that he or she is powerless to do so.
Edward Vinhateiro is the head of Patel Burkhalter Law Group’s trusts and estates section. In addition to his Juris Doctor from Loyola University, Mr. Vinhateiro holds a Master of Laws in Taxation from Boston University and provides services in the areas of tax and estate planning as well as non-profit organizations.