A living trust is useful to avoid probate, carry out one’s wishes regarding after-death distribution of assets, and in some cases avoid Federal estate taxes.
Question: “If we have a living trust, do we need a power of attorney?”
Answer: It depends on your circumstances. (As with many areas of 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, such as to sign a deed to sell 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.
• A Durable Power of Attorney will remain valid despite your later incapacity. A Springing Power of Attorney only takes effect when/if you become incapacitated.
• The power may be limited to a particular act, such as the execution of a note or deed, or it may be general, allowing the performance of a wide 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 or signature powers as a trustee or executor.
A power of attorney could be convenient if:
1. You had to be 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; or
2. 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 might 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 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. He can be reached at 661-255-1001.