At some point, even the healthiest and most independent among us may face a period of incapacity, be it from illness, injury or even old age. There may very well come a time when you can no longer handle your own business and financial affairs due to incapacity or incompetency, whether permanent or temporary. During this time, bills still need to be paid and certain financial affairs need to be managed. The best way to guard against this situation is to create a durable power of attorney beforehand.
A power of attorney, also known as a POA, is a written authorization to act on another’s behalf in private affairs, business or other legal matters. The person creating the POA is referred to as the “principal” or the “grantor,” as he is the one granting the power to another. This principal designates another to act on his behalf, known as the “agent.” This agent carries out the legal responsibilities on behalf of the principal with the same authority and effect as if the act was done by the principal himself. In short, whatever the agent does on behalf of the principal is legally binding.
Quite often, powers of attorney are used in the area of elder law where an aging parent can no longer handle his or her own affairs due to a lack of mobility or a decline in mental faculties. While the senior is still competent to grant the power to a child, a POA is prepared and executed, thereby authorizing the child to act on the parent’s behalf.
Once properly drafted and executed, the child now has the power to manage all of the parent’s financial and business affairs. These activities can range from common tasks such as banking, handling investments and paying bills to the more unusual tasks such as gifting, transferring land and assets and preparing tax returns. Basically, anything the parent could do can now be done by the child, who is now the agent.
This power can come in handy in a possible crisis situation to ensure bills are paid on time, property is protected and finances are maintained without missing a beat. Additionally, this document and the authority it grants can be invaluable when dealing directly with nursing homes, the IRS, Social Security, general creditors and financial advisors.
In most cases, POA’s can be easily and quickly drafted and executed as long as the principal is competent, immediately granting the authority. Should the principal no longer be competent, the authority must be granted by a Probate Court in the form of a guardianship, which is a much longer, complicated and more expensive process. And one of the best features of a POA is the fact that it “survives incompetency,” meaning if it is executed while the principal is still mentally sound, it will continue in effect even if the mental faculties decline. So as you can see, creating a power of attorney is a far quicker and more economical alternative.
One of the most useful and effective estate-planning tools for young and old alike, a properly and well drafted power of attorney can be an invaluable asset in your legal plan that will ensure your business and financial affairs will be well-managed if you cannot handle them yourself. And the assistance of an experienced estate planning attorney will make certain your POA is valid and effective.
Marc Page is an attorney with a general law practice in downtown Westerly. Licensed in both Rhode Island and Connecticut, he can be reached at 401-596-1726.