Power of Attorney

Power of Attorney

 

A power of attorney, when properly drafted and executed, is a document that effectively delegates all of your delegable legal rights. It is usually effective when signed, although “springing” powers of attorney that take effect in the event of incapacity are available, although Mr. Chiantella strongly advises against their use for a variety of practical reasons.

 

Why designate a Power of Attorney?

The most important reason to designate at least one power of attorney is to ensure someone has the authority to act on your behalf in the event you are incapacitated. Most people experience a period of incapacity prior to death. This is particularly true for senior citizens and younger people in poor health. Without a valid power of attorney in place, an incapacitated person’s family must use the costly, public and unpleasant alternative of procuring a guardianship in order to legally make decision on behalf of the incapacitated person.

In most situations, a power of attorney is typically granted in favor of a spouse. Although you may designate anyone as an “attorney-in-fact” with a power of attorney, it is extremely important you only delegate a trusted individual to serve in this role. Remember, this person is legally delegated by you to do almost anything you are able to do. If a spouse is not available or delegation to a spouse is otherwise inappropriate, other good choices include a trusted child, a trusted friend, a financial advisor, a trust company, an attorney or an accountant.

Important facts regarding a Power of Attorney

Not all powers of attorney are created equal. Many states, especially those in the Northeast, follow a statutory short form system in which a principal generally delegates authority to an agent, and only excludes those powers the principal does not want exercised on their behalf. In Florida, we have a common law system which only recognizes those powers specifically stated in the document. Thus, if your power of attorney does not contain the explicit authority for an agent to do a particular thing on your behalf, the agent is effectively without that power. This is a common problem with powers of attorney drafted in other states, and it is an especially serious problem with cheap “form” powers of attorney lifted from the internet, popular financial books and office supply stores. The most commonly omitted powers are the power to gift, the power to self gift and the power to create a qualified income trust. Mr. Chiantella finds the absence of these explicit powers creates a disaster for future estate planning and Medicaid qualification planning. The State of Florida checks powers of attorney used in the establishment of qualified income trusts for Medicaid planning purposes. If the power is not explicitly stated, the application is denied, and the incapacitated person is effectively without the ability to access crucial benefits at the worst possible time. Since the person is already incapacitated, the bell cannot be unrung. The result is catastrophic.

For wealthier clients, the ability of a child to make prudent gifts, including gifts to themselves for estate tax planning purposes can mean the difference between no estate taxes and in some cases millions of dollars worth of estate taxes. 

Obviously, this is a poor place in which to economize on legal advice. Do yourself and everyone in your family a favor; have a competent attorney draft your power of attorney. The cost of doing it right is minimal compared to the consequences of getting it wrong. 

Call to speak with Venice and Sarasota Attorney Michael A. Chiantella.  Call 941-488-1779 or click here to contact us online now.