When considering estate planning, one of the most important documents you should consider is a power of attorney. A power of attorney is a document that authorizes another person to act as an agent (or attorney in fact) for you. The document can be drafted so that the agent can do specific powers or general actions depending on how the form is drafted. It can take effect immediately or when you become disabled.
A general durable power of attorney is the most common document and allows for the broadest powers and allows the agent to act if you are incapacitated. The general power of attorney will include most financial transactions, including banking and the power to access financial accounts, buy or sell real estate and handle your taxes. A limited power of attorney is sometimes used for a specific transaction, such as a real estate purpose. It is important to note that a power of attorney allows the agent to make your financial decisions while a health care proxy/living will is a separate document that grants your agent powers to make health care decisions if you cannot.
If you are considering a power of attorney, there are important steps you should consider. Selecting the right agent can be crucial. Your agent should be someone trustworthy and capable of performing his or her duties. Unfortunately, choosing the wrong agent can lead to misuse of your assets.
Another consideration in making a power of attorney is whether you would like a Statutory Gifts Rider included. This Rider can allow your agent to gift funds for gift, estate or tax planning, Medicaid planning or for whatever purposes your agent(s) deems appropriate. In making gifts of your property, your “best interest” shall include gifts which would be likely to cause a reduction in estate tax due or which would carry out a plan for the protection of my assets against the costs of nursing home care in the foreseeable future.
A power of attorney has strict execution procedures otherwise it could be considered invalid and not be properly acknowledged by a third party. At Smolarek Law Offices, we assist our clients in preparing powers of attorney and having them properly executed.