Your Complete Guide to Estate Planning – CHAPTER 2
As we touched on in the previous chapter of our Complete Guide to Estate Planning, power of attorney (POA) is an essential estate planning document that gives a trusted individual or individuals, which you designate, the power to act on your behalf.
These designees are referred to as your “agents” or “attorneys-in-fact,” and they can take any action specified in the document such as managing your general affairs if you are unable to do so, or simply completing a single project for you, like selling your home. POA designations are flexible and can be shaped to accommodate a variety of circumstances.
Have you been wondering whether designating a power of attorney for yourself or a loved one is a good idea? Or perhaps someone close to you has asked you to take on this responsibility for them?
As part of our ongoing post series, comprehensive estate planning information is right here on our blog to make navigating the ins and outs of estate planning in Pennsylvania easy and worry-free. Today’s post offers a closer look at power of attorney designations, why they’re important, and how you can set up clear and effective POA documentation for greater peace of mind.
Common Questions about Power of Attorney
Estate planning naturally brings up a lot of questions about various aspects of assuring that your assets are transferred according to your wishes after you are no longer living while minimizing taxes and complications for your family. However, POA designations are an estate planning tool meant to benefit you and your loved ones during your lifetime, which can generate unique questions, particularly about personal relationships.
Remember that naming agents for yourself or agreeing to act as an agent for someone else is not something to be taken lightly.
Should I designate a Power of Attorney for myself, and who should be my agent?
Experienced probate and estates lawyers strongly recommend setting up POA designations as part of your estate plan to be fully prepared for all eventualities as you age. Like crucial other estate planning documents, such as your will, your POA should be reviewed on an occasional but regular basis once it has been established. It is not a “set it and forget it” kind of thing.
When thinking about who your agent or agents should be, the American Bar Association recommends choosing someone you trust, such as your spouse or adult children (POA agents cannot be under age 18 in Pennsylvania), who you know has high integrity as a personal trait.
As the so-called “principal” in your POA arrangement, you may name co-agents, though consider the relationship status of these individuals before you do this. For instance, your two adult children whom you adore equally, but who don’t tend to agree with each other, may not be great co-agents. Perhaps consider naming one as agent and making the other your successor agent, who will take over POA duties if your first agent is unavailable or unable to act when the time comes. If you need help choosing your agents, don’t hesitate to consult with an experienced estate planning advisor.
What are the different types of POA designations?
While the scope of any POA can be limited with specific language, there are essentially two different types of POA arrangements in Pennsylvania – financial POA and healthcare POA. At this time, Pennsylvania has not created a specific form to fill out to easily create either of these powers of attorney, so it is highly recommended that you work with a lawyer to draft up the documentation to include the exact language you need to protect yourself and give your agents only the power they require, no more and no less.
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About Healthcare/Medical POA
Also known as an advance directive for healthcare declaration, your healthcare or medical POA will provide instructions for medical decisions if you are unable to make your wishes known.
Deciding the best types of POA designations for your unique estate plan should be undertaken with great care, as well as with guidance from a knowledgeable resource. There can be unintended tax consequences for your agent if, for example, you grant them the ability to make gifts on your behalf.
Some additional terminology you may encounter as you create your POA includes:
Pennsylvania, as well as many other states, permit a “durable” power of attorney that remains valid once signed and adequately notarized until you die or revoke the document. Explicitly stating that your POA is not durable, such as including a specific termination date in the document, will make it such instead.
This means that the POA does not take effect immediately, but upon the occurrence of a future event, like the determination that you are unable to act for yourself due to mental or physical disability.
I’ve been asked to hold POA for a loved one, should I accept?
This is a deeply personal decision, but being a POA is not necessarily difficult. There are a few potential pitfalls to be aware of in advance, as we’ve discussed here on the blog in the past, but if you have a strong relationship with the individual who has asked, you can feel confident accepting the responsibility. Just remember that holding power of attorney for someone else puts you into what’s known as a fiduciary relationship with that person, and you will then have a legal obligation to make decisions about that person’s money and assets (as a financial POA) that are good for that person, not decisions that are good for you or another third party.
You may always consult an experienced estate planning lawyer with questions and concerns if you are unsure about your role.
Need More Answers? Is Someone Challenging Your Power of Attorney?
May, Herr & Grosh is here to help with complex estate planning and administration-related matters. Put our generations of legal excellence in guiding Lancaster County families in planning for the proper handling of their estates to work for you and your loved ones. Get in touch with us today to arrange your free phone consultation.