One of the useful devices in the estate planning toolbox is the Power of Attorney. This document gives another person the grantor’s authorization to act on his/her behalf in either limited or unlimited transactions.
A few examples are illustrative:
Suppose you are in escrow to purchase a property, but plan to be unavailable when certain papers may have to be signed. You might give a trusted relative or friend your power of attorney to act for you in executing documents related to the property transaction.
If you plan to be out of the country but may need to transfer funds from your bank at home, the holder of your power of attorney could withdraw money from your account on your behalf.
There are two primary types of power of attorney:
1. The Durable Power of Attorney is effective when executed, and is not rendered ineffective despite your later disability.
2. The Springing Power of Attorney only becomes effective, later on, upon your disability.
Some people have attorneys prepare elaborately worded powers of attorney, enumerating a wide variety of situations and conditions under which the power may be utilized. Others opt for a statutory form, authorized by California law: short and sweet, it lists 13 different applications, any of which or “all of the above” may be checked. An advantage of the latter form is its familiarity to entities such as financial institutions which you may want to rely upon and accept its terms.
There are a few limiting factors to consider:
1. The power of attorney is only valid during the lifetime of the grantor. When the grantor dies, the power dies.
2. The only assets reached by a power of attorney are those standing in the name of the grantor as an individual. Thus, the trustee of a trust cannot delegate fiduciary duties by granting a power of attorney to act in place of such trustee.
With these limitations in mind, if I have a living trust and if I hold title to all my assets in my name as trustee of that trust, there are no assets to which a power of attorney would apply.
Is a power of attorney a document which should be included in your estate plan? Perhaps, depending on your own circumstances. The use of such a form should be discussed with an attorney experienced in such matters.
Jerry Kessler practices law in Santa Clarita. For more information, please call 661-255-1001.