Asset transfers between individuals or estates are considered taxable events by the Internal Revenue Service.…
One of the most important estate planning documents you can possess is a durable power of attorney. It allows someone who you appoint (your agent) to make decisions on your behalf in the event you become incapacitated. If you have not appointed an agent then your friends and family may not have the authority to make decisions on your behalf. In that case, a judge may have to appoint someone for this task, which can require a court process that is expensive and tedious.
While a durable power of attorney (POA) is one of the most common estate planning documents, it is also one of the most misunderstood. This article will break down some of the common misconceptions regarding POAs and help you understand what you need to create a valid POA.
Misconception: Technology is so great now, there is no need to speak with an attorney, I can just create my own POA online.
Truth: POAs are not one-size-fits-all. Each person’s situation is unique. If you use a cookie-cutter program it may not cover specific transactions. In order to conduct many financial transactions, specific language must be used to grant proper authority. Elder law attorneys create these documents regularly which gives them valuable experience in unique situations and can make sure you have all your bases covered.
Misconception: POAs are one-and-done documents. Once I create it I will never have to touch it again.
Truth: POAs are documents that should be updated regularly. Laws change and if you have not regularly updated your documents you may find out too late that your POA is not valid. Further, some financial institutions may not accept a POA that was not updated in the last few years for fear of a lawsuit.
Misconception: I shouldn’t make my POA active until I become incompetent (a “springing” POA).
Truth: While the timing of granting agency through a POA is a matter of personal preference and immediately effective POA should be considered. A springing POA usually requires a finding of incompetency by at least one doctor and sometimes two. However, there may be an emergency where a doctor will not sign off that you are incompetent. Making your POA effective immediately removes the need for a doctor to declare you incompetent.
Misconception: I don’t need a POA, I’m young and healthy, plus I don’t have many assets.
Truth: Every single person over the age of 18 should have a POA. You never know when something catastrophic may happen. You need to have a plan in place to take care of yourself in the event you become incapacitated unexpectedly. If you do not have these documents in place then you have no control over who will be making decisions on your behalf. It can be expensive and time-consuming for your loved ones to go through court to have one of them appointed by a judge.
POAs are absolutely essential documents that everyone should have. It is important to consult an elder law attorney who can examine your unique situation to create your POA and to keep it updated. Please do not hesitate to contact our office if you would like to speak with an attorney about creating your own POA. Please contact our New York office or call us at 607-271-9270.