Questions often arise about how different estate planning documents work together, and they are frequently very good questions. Powers of Attorney (POA) are some of the most commonly used estate planning documents and they are also some of the most misunderstood estate planning documents, says nwi.com in a recent article “Estate Planning: Do Powers of Attorney lapse?”
A POA is a document that authorizes another person to act on behalf of the person making or signing the document. The person named in a POA can also be referred to as the Attorney-in-Fact, or AIF. The authority granted to the AIF is usually spelled out in the document itself. Some POA documents grant a wide range of authority, while others are limited to a specific action. An estate planning attorney can create a POA that suits a person’s particular needs, which is far better than a generic document that may not be accepted because it is too broad.
There are also different types of POAs. Durable POAs usually do not terminate upon a person’s incapacity and are frequently drafted for the purpose of caring for a person in case they are incapacitated. There are also other limited or special POAs that only work for a specific date or time frame. At the end of that time frame or upon that date, the POA terminates.
It’s important to note, however, that all POAs terminate upon the death of the maker or principal. The only power that can survive after the death of the maker is the authority to dispose of the maker’s remains, and that varies by state. This means that the POA will not nominate an executor, and cannot do anything to give someone authority over your body or your property after you die.
A POA can also be terminated at any time by the principal. This termination should be in writing, and it can be terminated by revoking the POA within the terms of a new POA, or by execution of a revocation. Either way, the person should notify the AIF that they no longer have the authority to act under the revoked POA, and any entity who may have a copy of the revoked POA should be notified that it is no longer valid. The revocation can also be recorded at the county recorder’s office. An estate planning attorney in your state will know what rules apply in your area.
When a POA was created is also important. Although a POA signed years ago is still legally valid, estate planning attorneys often look at the date of execution for the simple fact that banks and other financial institutions are reluctant to accept POAs that were created too long ago. In that case, institutions sometimes will require an affidavit affirming that the document is still valid and that the AIF has the authority to act under it.
However, it is recommended that when you have your estate plan reviewed every three or four years, you also have your estate planning attorney update the Power of Attorney. This way there is less of a chance that a bank or other institution will balk at the document. The same goes for your health care proxy, also known as a Health Care Power of Attorney.
Reference: nwi.com (November 3, 2019) “Estate Planning: Do Powers of Attorney lapse?”