When it comes to estate planning (EP), the focus is often on the Last Will and Testament. Yet, one could easily argue the Power of Attorney (POA) is just as important. A POA is a legal document that you (the “principal”) execute during your lifetime, while you have mental capacity, designating another person (your “agent”) to handle your financial affairs if there comes a time when you are unable to do so yourself. Yet, not all POAs are created equal… If you become ill or suffer a tragic accident and your POA doesn’t cut the muster, your agent will not be able to take necessary actions on your behalf, and a Guardianship proceeding in the Supreme Court of the County where you are physically located becomes the only option. How do you know if your POA is sufficient?
First, make sure your POA is not a “springing” power of attorney, meaning that your agent is authorized to act only after a specific event or condition occurs—this can be problematic as it may be subject to interpretation. Your POA should be effective the moment you (and your agent) sign it.
Additionally, it’s crucial to confirm your POA is “durable,” such that it survives your subsequent incapacity (i.e., your agent should be able to act on your behalf even after you have become incapacitated/unable to manage your affairs). A general POA alone doesn’t survive your subsequent incapacity.
Moreover, your POA shouldn’t be limited to any one specific task, but rather, should include broad powers to act on your behalf in legal and other matters (e.g., financial transactions, real estate, signing contracts), and in particular, broad powers to make gifts.
If your POA doesn’t expressly convey the ability to gift unlimited amounts, then by default, your agent can only gift up to $5,000 annually. The power to transfer money out of your name is vital if your agent needs to pay your bills, secure a home care aide for you, engage in Medicaid planning for you, make you financially eligible for Medicaid, enroll you in a pooled trust, or, for higher net worth individuals, engage in estate tax planning.
Also, verify that your POA is up to date—that it’s on the 2021 NY Statutory Short Form and designates someone you (still) trust completely as the primary agent, as well as an alternate if the primary cannot act. These individuals should be aware of their roles, your wishes, and where to locate not only the POA itself, but also your financial information.
Lastly, ensure your POA is binding. Using an online drafting platform may seem convenient and less expensive than hiring an EP attorney, but DIY forms may not be valid (or validly executed) in accordance with the laws of NY State. If requisite formalities are not followed, the POA is useless. A valid durable general POA that is broadly drafted will allow you to choose whom you want in the driver’s seat should disaster strike without the need for Court intervention.
