When discussing estate planning with clients, many believe the conversation begins and ends with the creation of a will. While the drafting of a will is a critically important component of a proper estate plan, designating a trustworthy power of attorney cannot be overlooked or treated lightly.
Simply stated, a Power of Attorney (“POA”) is an agent for the principal (the individual naming the POA) who is charged with the obligation of making proper financial and property decisions for said principal. The agent assumes the responsibility of acting on behalf of the principal in the event that the principal is no longer able to act on his or her own behalf, or is otherwise unavailable to conduct a transaction (such as a principal being out of the state or country on the date of settlement for the sale of real estate).
An agent’s responsibilities could include, among many others tasks, conducting financial transactions on the principal’s behalf, paying bills, and maintaining bank accounts. The individual designated as POA need not be a relative, but should certainly be someone the principal trusts in carrying out dealings on his or her behalf. The appointing of a Power of Attorney is not a decision to be taken lightly, and should be based solely on the principal’s best interests.
There are several types of powers of attorney, including a general power of attorney, a limited power of attorney, and a durable power of attorney. A general power of attorney grants authority to an agent to conduct transactions on the principal’s behalf (such as banking and real estate), enter into contracts, and exercise the principal’s rights related to stock. A limited power of attorney is transaction specific, meaning the agent only has the right to take action on behalf of the principal in situations specified in the document (such as the sale of real estate or personal property). Finally, there is the durable power of attorney. This final type of POA authorizes an agent to take action prior to and following a disabling event to the principal. The durable power of attorney differs from the general power of attorney in that the authority of a general power of attorney is no longer effective once the agent is deemed incapacitated. Because a durable power of attorney remains effective even after a disability, its popularity has increased over the years.
There have been recently enacted changes to the laws governing Powers of Attorney which went into effect fully on January 1, 2015. The full record of legislation is available at here.
Whether you do not have a Power of Attorney OR you have one which was drafted prior to January 1, 2015, the change to the laws regarding Powers of Attorney in Pennsylvania warrant considering creating or updating this document.
If you have any questions about the information in this article, your estate plan generally, or are interested in getting more specific information regarding the impact of the changes to the laws governing Powers of Attorney cited above, the attorneys at Howland Hess O’Connell are available to help you today. If you haven’t reviewed your estate plan since January 1, 2015, or don’t have one, it is in your best interest to arrange a time with an attorney to consider the options available to you.
If any of the above information applies to you, call for a free consultation at (215)-947-6240 or contact us online to schedule a meeting.
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