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October 14, 2021

How to Assess the Effectiveness of Your Power of Attorney for Property

power of attorney

A power of attorney for property is included in many estate plans because it allows you to appoint another person to pay your bills, file your tax returns, manage your investments, and handle your property in the event that you’re unable to do so. However, some powers of attorney are less powerful and effective than others, so it can be worthwhile to review your power of attorney periodically with your advisor and check to see if it continues to serve its intended purpose. 

Things to consider: 

How old is your power of attorney?

Your attorney-in-fact won’t be able to act on your behalf unless the relevant third parties agree to honor your power of attorney. If the power of attorney is several years old, banks and other third parties are often hesitant about following it. As such, it’s a good idea to sign a new one every two or three years.

How durable is your power of attorney?

“Durable” means that a power of attorney will continue in force if you become incapacitated. Not all states’ laws presume that powers of attorney are durable, so your power of attorney may become unenforceable unless it explicitly states that it’s durable.

Is your power of attorney powerful enough?

You’ll want to specifically include certain powers that your attorney-in-fact is authorized to use in the event that you become incapacitated. Otherwise, they may not have the authority to carry out your wishes as you intended. For example, if you want your attorney-in-fact to make gifts or estate planning decisions, such as transferring assets to a trust, you’ll need to specify that your attorney-in-fact has this authority.

When does your power of attorney take effect? 

If the state you live in allows “springing” powers of attorney, the specific event stated in the power of attorney must occur before your attorney-in-fact (the person you’ve appointed to hold your power of attorney) is authorized to act. In most cases, the power of attorney will be designed to “spring” in the event that you become incapacitated. If the state you live in doesn’t allow for “springing” powers of attorney, your attorney-in-fact can act at any time once the document is executed. 

Please contact us if you have questions or need assistance regarding power of attorney.

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