ALL POWERS ARE NOT ALIKE

All Powers of Attorney are not alike. Some Powers are durable, others aren’t. Some Powers name one “Agent” – the person granted authority to act for another individual, called the “Principal.” Some name multiple, alternate Agents – Agents who will serve if the primary Agent is unable or unwilling to serve. Some name co-Agents.

Under a new law, co-Agents can be “several,” meaning that each co-Agent can make independent decisions for the Principal without consulting the other Agent, or co-Agents can be “joint,” meaning that the co-Agents have to make decisions together. A Power can be effective “immediately,” meaning that once the Principal signs the Power, the Agent can make financial decisions for the Principal, or a Power can be effective only upon the Principal’s disability. This is called a “springing” Power of Attorney.

So, there are a number of options. But what do they mean for you and what type of Power of Attorney should you choose.

Because none of us know if disability will strike us or when, a Power of Attorney could prove to be the most important document we will ever sign. Since it is such an important document, you should fully understand your options.

Do I sign a Power of Attorney that is effective immediately or springing? I typically recommend that people make their Powers effective immediately. Yet, by making it effective immediately, you are imposing a tremendous amount of trust in your Agent, so you should choose your Agent wisely. If you don’t feel completely comfortable giving someone that authority, you could sign an immediately effective Power of Attorney but refrain from giving the Agent a copy of the document. Tell the Agent you’ve signed the Power and tell them where they could find it in the event they needed it.

If you still don’t feel comfortable signing a Power of Attorney that is effective immediately or if other reasons make such a Power imprudent, you can sign a springing Power. If, however, you are going to say that the Agent can only act if you are “disabled,” then you better define disability in the document. For example, you could say “disability” exists when two physicians or a court have declared the Principal disabled.

With Agents, I typically recommend that people name multiple, alternate Agents. In this way, if the primary Agent is unable to serve, other Agents can step in to serve immediately and take up the job where the initial Agent fails. Sometimes, people feel more comfortable naming co-Agents. Perhaps they have two children, and they don’t want to be perceived as favoring one child over the other.

As I mentioned, co-Agents can be several or joint. Joint co-Agents could pose a problem. What if the co-Agents don’t agree. Since they must agree on each financial decision being made, if you’re going to choose joint co-Agents, you better think about this question, and you might want to put a provision in the Power to deal with such situations. If your co-Agents are several, what happens if one co-Agent makes a decision regarding your investments one day and the other co-Agent makes a different decision a week later.

Co-Agents do present a greater possibility of conflict or conflicting decisions. If all you’re worried about preventing with co-Agents is hurt feelings, you could always name alternate Agents in descending order, based upon the age of the children.

Lastly, if you’re planning for disability, be sure that your Power is “durable.” A durable Power of Attorney remains effective if and when you become disabled. A non-durable Power would lose its effectiveness if you ever became disabled.

A power of attorney is one of the most useful legal documents a person can have, yet it is frequently overlooked until a crisis occurs. By that point, the available options may be more limited, more expensive, and far more complicated than they needed to be.