Power of Attorney-
What to explain and discuss with the client
By Kenneth Vercammen, Esq of Edison, NJ
The ABA GP Solo Division published Ken
Vercammen’s 3rd book “Wills and Estate Administration”. This is a
chapter of the book. The book is available at
A
Power of Attorney is a written document
in which a competent adult individual (the "principal") appoints
another competent adult individual (the "attorney-in-fact") to act on
the principal's behalf. In general, an attorney-in-fact may perform any legal
function or task, which the principal has a legal right to do for him/herself.
You may wish to sign a Power of Attorney giving your spouse, children or
partner the power to handle your affairs if you become ill or disabled.
An
important part of lifetime planning is the Power of Attorney. Valid in all
states, these documents give one or more persons the power to act on your
behalf. The power may be limited to a particular activity (e.g., closing the
sale of your home) or general in its application, empowering one or more
persons to act on your behalf in a variety of situations. It may take effective
immediately or only upon the occurrence of a future event (e.g., a
determination that you are unable to act for yourself). The latter are
"springing" Powers of Attorney. It may give temporary or continuous,
permanent authority to act on your behalf. A power of attorney may be revoked,
but most states require written notice of revocation to the person named to act
for you. See
In the absence of a Power of Attorney or
other legal arrangement to distribute property if you become disabled, your
spouse, family or partner cannot pay your bills or handle your assets. The result can be lengthy delays.
The term "durable" in reference to a power of attorney means that the
power remains in force for the lifetime of the principal, even if he/she
becomes mentally incapacitated. The
Power of Attorney can be effective immediately upon signing or only upon
disability. A principal may cancel a Power of Attorney at any time for any
reason. Powers granted on a power of
attorney document can be very broad or very narrow in accordance with the needs
of the principal. A Durable power of attorney stays in effect even if someone
becomes disabled.
Why is Power of Attorney so important?
Every
adult has day-to-day affairs to manage, such as paying the bills. Many people are under the impression that, in
the event of catastrophic illness or injury, a spouse, or child can
automatically act for them.
Unfortunately, this is often wrong, even when joint ownership situations
exist. A Power of Attorney allows your partner or another person to administer
your assets during your lifetime, either upon disability or now.
The lack of a properly prepared and
executed Power of Attorney can cause extreme difficulties when an individual is
stricken with severe illness or injury rendering him/her unable to make
decisions or manage financial and medical affairs. States have a detailed, expensive legal
procedures, called Guardianships or conservatorships, to provide for
appointment of a Guardian. These
normally require lengthy, formal proceedings in court and are expensive. This
means involvement of lawyers to prepare and file the necessary papers and
doctors to provide medical testimony regarding the mental incapacity of the
subject of the action. The procedures
also require the involvement of a temporary guardian to investigate, even
intercede, in surrogate proceedings. This can be slow, costly, and very
frustrating. In addition, the domestic partner can be challenged in a
guardianship by the incapacitated person's family members.
Advance preparation of the Power of
Attorney could avoid the inconvenience and expense of guardianship
proceedings. This needs to be done while
the principal is competent, alert and aware of the consequences of his / her
decision. Once a serious problem occurs,
it is usually too late.
Counsel
clients against using cheap online forms. Banks often will not honor the forms
unless they have reference to the State statute. For example, in NJ we advise
Do not use a form purchased online.
A
Power of Attorney should contain reference to the applicable state statute
requiring banks to honor the Power of Attorney. Section 2 of P.L. 1991, c. 95
(c. 46:2B-11).
With a valid
Power of Attorney, your agent can take any action permitted in the document.
Often your agent must present the actual document to invoke the power. For
example, if another person is acting on your behalf to sell an automobile, the
motor vehicles department generally will require that the Power of Attorney be
presented before your agents authority to sign the title will be honored.
Similarly, an agent who signs documents to buy or sell real property on your
behalf must present the Power of Attorney to the title company. The same
applies to sale of securities or opening and closing bank accounts. However,
your agent generally should not need to present the Power of Attorney when
signing checks for you.
Why would
anyone give such sweeping authority to another person? One answer is
convenience. If you are buying or selling assets and do not wish to appear in
person to close the transaction, you may take advantage of a Power of Attorney.
Another important reason to use Powers of Attorney is to prepare for situations
when you may not be able to act on your own behalf due to absence or
incapacity. Such a disability may be temporary (e.g., due to travel, accident,
or illness) or it may be permanent.
If you do
not have a Power of Attorney and become unable to manage your personal or
business affairs, it may become necessary for a court to appoint one or more
people to act for you. People appointed in this manner are referred to as
guardians, conservators, or committees, depending upon your local state law. If
a court proceeding, sometimes known as intervention, is needed, than you may
not have the ability to choose the person who will act for you. With A Power of
Attorney, you choose who will act and define their authority and its limits, if
any. Guardianships and other court proceedings are very expensive and time
consuming.
There are helpful clauses and definitions in the Uniform
Probate Code ARTICLE 5B UNIFORM
POWER OF ATTORNEY ACT (2006) As of 2015 the following states have adopted all
or part: Alaska, Arizona, Colorado, Hawaii, Idaho, Maine, Massachusetts,
Michigan, Minnesota, Montana, Nebraska, New Jersey, New Mexico, North Dakota,
South Carolina, South Dakota, U.S. Virgin Islands, Utah
Gift giving clause in Power of Attorney
To make gifts to facilitate my qualifying
for the receipt of government benefits for my long-term health care and nursing
home care needs (e.g., old age pension and Medicaid benefits). Any gifts made
pursuant to this paragraph are to be made unconditionally as determined in the
sole discretion of my attorney-in-fact. Such gifts shall be irrevocable. My
attorney-in-fact is authorized to make said gifts so long as my long-term care
is reasonably provided for by my assets subject to this Power, or otherwise
during the time period I would be disqualified from receiving long-term care
and/or medical assistance under the State Medicaid program. Any gifts may be
made outright or in trust and may include both real and personal property.
Source: Estate
Planning for Same-sex Couples ABA
By Joan M. Burda
Kenneth A. Vercammen is a trial attorney in Edison, NJ. He is co-chair of
the ABA Probate & Estate Planning Law Committee of the American Bar
Association Solo Small Firm Division.
The ABA is publishing his book “Wills and Estate Administration,
available at http://shop.americanbar.org/.”
He is a speaker for the NJ State Bar Association at the annual Nuts &
Bolts of Elder Law & Estate Administration program.
He was Editor of the ABA Estate Planning Probate Committee Newsletter.
Mr. Vercammen has published over 150 legal articles in national and New Jersey
publications on litigation, elder law, probate and trial topics. He is a highly
regarded lecturer on litigation and probate law for the American Bar
Association, NJ ICLE, New Jersey State Bar Association and Middlesex County Bar
Association. His articles have been published in noted publications included
New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey
Lawyer. He established the NJlaws website www.njlaws.com which includes
many articles on Estate Planning, Probate and Wills.
KENNETH
VERCAMMEN & ASSOCIATES, PC
ATTORNEY AT LAW
2053
Woodbridge Ave.
Edison,
NJ 08817
(Phone)
732-572-0500
(Fax)
732-572-0030
www.njlaws.com
http://www.njwillsprobatelaw.com
