My new clients were a couple with grown children and substantial assets. I had described the most important benefits of the living trust, including probate avoidance, the nomination of the clients’ chosen successor trustees, a clear statement of their wishes regarding after-death distribution of their assets and the avoidance of significant federal estate taxes. Then they asked, “If we have a living trust, do we need a power of attorney?”
Good question, I replied. It depends on your circumstances. As with many areas of the law, the answer to clients’ questions is often, “It depends.”
A power of attorney is a document in which you appoint someone to perform certain legal tasks on your behalf. For example, you could give your brother power to sign a deed to sell your real property or to withdraw funds from an account, standing in your name, alone.
Key features of a power of attorney include the following:
• A power of attorney is only valid during the grantor’s lifetime. When the grantor dies, the power dies.
• If you sign a durable power of attorney, your later incapacity will not invalidate the power. Depending on your situation, you may prefer to execute a springing power of attorney, which only takes effect when/if you become incapacitated.
• The power may be limited to a particular act or type of act, such as the execution of documents with respect to one asset; or it may be general, allowing the performance of a variety of actions.
• The power may be granted with respect to personal actions, but not to fiduciary responsibilities. Thus, you cannot use a power of attorney to delegate your duties as a trustee or executor, or to authorize another person to sign documents on your behalf, in your capacity as a trustee or executor.
A power of attorney could be useful:
• If you had to go out of town, just before close of escrow on your house. The holder of your power of attorney could sign documents on your behalf, during your absence.
• If you were hospitalized and temporarily unable to sign documents, but needed to withdraw some funds in your name, such as those in a retirement account. The holder of your power of attorney may be able to access these funds.
A word of caution: because the holder of a power of attorney can act in your place, often without your knowledge, it is obviously imperative that you entrust such power only to someone you thoroughly trust. The abuse of a power of attorney could be both extensive and expensive.
In the right situation and if you have someone you trust to carry out your instructions, a power of attorney can be a useful tool.
Jerry Kessler practices law in Santa Clarita. For more information, please call 661-255-1001.