The New York Power of Attorney
Incapacitation is more far common than most people think. Per National Insurance statistics, at least one in four individuals who are now 25 years of age will deal with disability before they hit the golden age of 65. Another statistic shows that there is almost an 80% chance that an individual in this country will be disabled for at least 45 days within the span of their life. Disability in this instance can be as minor as a debilitating flue up to a major injury. During this period of limited mobility, will your monthly mortgage payment still need to be made ? Will your IRA accounts manage themselves? Will the need to pay your bills stop on account of your physical impairment? The answer is no. One great option that is available to all people regardless of age (must be over 18) is a New York Statutory Short Form Power of Attorney, or what we call a “POA” for short. In sum, the POA ensures that your life goes on and your bills are paid on time no matter what illness you encounter.
What exactly is a Power of Attorney?
This is a great tool in your estate planning arsenal which allows you as the principal to designate an agent who will have the appropriate authority to make decisions and take action regarding your business, financial, banking, & real estate affairs. As the principal, you set directions and spell out any limitations of the agent’s powers in the Power of Attorney. This document must be in writing to be binding and effective. Your designated agent does not have broad powers. He or she is limited to no more than what is described in the drafted Power of Attorney. As an example, the agent can do the following:
- Withdraw funds from your bank
- Pay your bills
- Register your vehicle
- Transfer real estate and take a substantive role in any real estate transaction
- Manage your general finances and brokerage accounts
- Represent you during tax audits
- Deposit checks on your behalf
If you become incapacitated in a sense where you are no longer of sound state and mind, the only way that a person can act on your behalf is by petitioning the court for a Guardianship. This process is very costly and can take several months to settle. Setting up a power of attorney is cost & time efficient. Preparing a POA requires no court intervention and usually runs a few hundred dollars. The document outlines all powers and limitations of the agent, and requires the notarized signature of the principal. Nothing further. A guardianship requires hefty attorney fees, court filing fees, affidavits, and voluminous pleadings.
Who should you choose to be your agent?
The individual you choose as your agent should be someone you trust. In most situations, the spouse is usually appointed as the agent and the children are successor agents, if the unfortunate circumstance occurs where the spouse is unable to act. The power appointed to the agent is rather substantial (i.e. withdrawing bank funds) so think carefully as to whom you want to manage your affairs. Your credit cards, check books, and online banking accounts are in the hands of your agent. You want to take this matter as seriously as possible. As a hedge, you have the option to name co-agents, who will act simultaneously. This means that multiple agents must act in unison to accomplish anything. The advantage of having co-agents is the no one agent will have unlimited control. The disadvantage of naming co-agents is that there may be issues when several opinions are on the table on how to handle even the simplest of transactions. However, do keep in mind that the power you bestow upon your agent can be very limited. For example, you can give a POA in which the agent is only allowed to register your car with the Department of Motor Vehicles, nothing further. As the principal, you are in control. You set the terms.
When Does The Power of Attorney Go Into Effect?
There are typically two scenarios when the POA comes into effect. One situation is termed “springing powers.” The POA will contain a clause which requires the agent to act on behalf of the principal only if the principal becomes incapacitated. A letter from the main physician of the principal must be produced confirming the incapacitated state.
The most common situation in which a POA comes into effect is as soon as the document is executed.
The principal can revoke the POA at any time by simply informing the agent that the POA has been terminated. The revocation must typically be in writing. Also, it is a wise practice to contact the institutions in which the POA may have been utilized and inform them of the revoked status of the POA.
You want to also be mindful of the two general types of Powers of Attorney that exist:
- Durable Power of Attorney: Incapacitation is not an issue for the survival of this power of attorney.
- Non-Durable Power of Attorney: As soon as the principal becomes incapacitated, this particular type of POA is no longer in effect.
From an estate planning perspective, the durable power of attorney is obviously the better choice especially if you are planning a strategy to ensure others can make decisions on your behalf. Remember that a guardianship can get vey expensive very fast. You want to make sure that your ducks are in a row in case you reach a state where you cannot do any of leg work to make sure your finances are straight.
From a transactional perspective, the non-durable power of attorney can still be useful. It works well if you are unable to attend a real estate closing, tax audit, or any other financial situation that would typically require your presence.
Once the POA has been properly drafted, the principal at this point would be required to place their initial next to each enumerated power which they wish to appoint to an agent. The agent will then need to sign and acknowledge that they have read the section titled “Important Information for Agent” which states their obligations, role, and limitations.
If you are a New York resident, do not wait until the last minute to get yourself a Power of Attorney. Contact an NY elder law lawyer or probate lawyer in Brooklyn immediately. We are headquartered in 85 Broad Street 18th Floor, New York, NY 10004. and our number is (646) 535-1667. Find us on YouTube, Facebook, LinkedIn, Twitter, and Google+.