A power of attorney is an important estate planning tool that you should consider as you contemplate creating other estate planning documents such as a last will and testament and a trust. With a power of attorney you grant to another person, known as your "attorney-in-fact," power to act on your behalf with respect to financial matters. Typically, a power of attorney terminates if you become disabled or incompetent. However, unless it specifically states otherwise, a New York power of attorney is durable. A durable power of attorney remains in effect even if you become incapacitated but will terminate upon your death. NY GOB LAW § 5-1501A. Having an attorney-in-fact to take care of your financial matters is vitally important to make sure your finances do not fall into disarray while you are unable to take care of them. As you consider the best way to prepare for the possibility of your future incapacity contact an experienced Manhattan Attorney-in-Fact Lawyer who will be able to educate you on the value of having a durable power of attorney and attorney-in-fact, as well as the value of other important estate planning tools such as a health care proxy, living will, and last will and testament.
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A durable power of attorney is a legal document that gives the person you name as your attorney-in-fact the authority to act for you with respect to your financial affairs. In drafting your power of attorney you have enormous flexibility in granting and limiting your attorney-in-fact's authority. For example, with a power of attorney for financial matters, you can grant someone the power to:
- Pay your bills and everyday expenses such as your credit card bills and your utility bills
- Provide maintenance to family members that you would have provided, with a limitation on the monthly dollar amount
- Manage your real estate, including paying your mortgage, maintaining your property, buying and selling real estate, and collecting rent
- Manage investments, including voting, receiving or reinvesting dividends, capital gains or interest, or selling, assigning or transferring securities
- Manage your tax returns, including preparing, signing and filing your tax returns as well as paying any taxes owed
- Manage your bank accounts, including opening, closing, or modifying bank accounts, and making deposits and withdrawals
- Purchase insurance policies for you, including life, medical, long-term care and disability
- Resolve claims against you by paying, contesting, or compromising.
- Borrow money on your behalf, including cancelling or continuing credit card accounts
- Run your business for you, including forming any type of legal entity for you, transferring your property to a business owned by you, or reorganizing, merging or dissolving your business.
- Manage your retirement accounts, including establishing, contributing, and rolling funds over.
- Hire professionals on your behalf such as an attorney or accountant.
- Apply for and collect any government benefits to which you are entitled such as Social Security and Medicare
However, a durable power of attorney for finances would not give your attorney-in-fact the authority to transfer your assets to him or herself or to make or revoke your last will and testament or codicil.What is Needed to Execute a Durable Power of Attorney?
In order to properly execute a power of attorney New York law requires certain formalities. The power of attorney must be legible. You must sign, date it and your signature must be acknowledged. It must also be signed and dated by the attorney-in-fact you named in the power of attorney. Furthermore, there is certain statutory language that must be included in the power of attorney in order for it to comply with New York law. NY GOB LAW § 5-1501B. A durable power of attorney typically becomes effective on the date that the attorney in fact's signature is acknowledged. However, you can make the power of attorney "springing," so that it only becomes effective in event you become incapacitated or some other contingency occurs. For example, your durable power of attorney could include language such as: "My Attorney-in-Fact shall have no power under this legal instrument unless written confirmation of two Board Certified Physicians, Psychiatrists, or any combination thereof, who are intimately familiar with my physical or mental health, stating that I am no longer competent to handle my own financial affairs.”When Does a Durable Power of Attorney End?
If you decide that you need to terminate the power of attorney, you must give notice to your attorney-in-fact. You can revoke a durable power of attorney any time you choose to as long as you are mentally competent. Revocation of a durable power of attorney occurs automatically if you die. NY GOB LAW § 5-1511. By law a power of attorney will also terminate if any of the following events occur:
- You revoke your attorney-in-fact's authority and there is no successor attorney-in-fact who is able or willing to serve
- Your attorney-in-fact dies or is otherwise unable to serve and there is no successor attorney-in-fact who is able or willing to serve
- The authority of your attorney-in-fact terminates and there is no successor attorney-in-fact who is able or willing to serve. Examples of when the authority of your attorney-in-fact will terminate include if your attorney-in-fact dies, if you revoke his or her authority, of if you are married to your attorney-in-fact and that marriage ends by divorce or annulment.
- The purpose of the power of attorney is accomplished
- A court order revokes the power of attorney
N.Y. GOB. LAW § 5-1511
The execution of a power of attorney automatically revokes prior powers of attorney.
Upon your death, the winding up of your affairs and administering your estate is not the job of your attorney-in-fact but of the executor you named in your will. If you want the person who you name as your attorney-in-fact in your durable power of attorney to also handle your affairs after your pass away, you must also name that person in your will as your executor.What is the difference between a durable power of attorney and a health care proxy?
A health care proxy and a durable power of attorney are similar. In fact in some jurisdictions a health care proxy is called a durable power of attorney for health care. With a health care proxy you give your agent the authority to make decisions for you regarding medical issues, while a durable power of attorney typically relates only to financial matters. A health care proxy is also "durable" in that under New York’s Public Health law your agent’s authority to make health care decisions begins only when your attending physician concludes that you have lost the capacity to make such decisions for yourself. N.Y. PBH. LAW § 2983.
Examples of the decisions that you can give your agent the authority to make in your health care proxy include whether you should receive artificial respiration, CPR, antibiotics, artificial nutrition and hydration, antipsychotic medication, electric shock therapy, surgery, dialysis, organ transplantation, or blood transfusions. You can give your agent different authority depending on your condition. For example, you can give one instruction to your agent if you are terminally ill and another instruction if you have brain damage that makes you unable to recognize people, and there is no hope that your condition will improve.
If you give your agent the authority to withdraw or withhold life-prolonging treatment such as CPR, surgery or dialysis, before your agent can exercise that authority New York law requires that a second physician confirm that you lack the capacity to make health care decisions. N.Y. PBH. LAW § 2983 (1)(a)
With a health care proxy you can give your agent the authority to donate your organs and tissues. This means that you can allow your agent to authorize the donation of your organs and tissues without limitation, or you can give more limited authority and specify which organs and tissues you want donated and for what use.What if I do not have a Durable Power of Attorney?
The consequence of not having a durable power of attorney is that there may not be a plan or an understanding as to how your financial and personal affairs should be handled while you are incapacitated. Furthermore, there are many transactions that no one other than you would legally be able to complete. For example, without a durable power of attorney your daughter may still be able to make sure that your bills are paid. However, she would not be able to access your bank account or handle most other financial transactions on your behalf. Without a durable power of attorney the result would likely be that the court would end up intervening and appointing a conservator, also referred to as a guardian, to make financial decisions for you. In general, a court will seek to appoint a family member to act as your conservator. However, if there is no suitable family member available, the court may appoint a non-relative or a public conservator. The conservator will not be accountable to your family, but will be accountable to and supervised by the court. The conservatorship would remain in place as long as the court determines that you need a conservator. If your medical condition improves enough so that you are able to resume taking care of your affairs, the court will end the conservatorship. NY MHY LAW § 81.36. Otherwise, the conservatorship will remain in place until you pass away.
A conservator can be appointed to take care of your finances or to take care or your day-to-day well-being and health care if you also do not have a health care proxy in place. In many cases, particularly if you are incapacitated, a single conservator is appointed to handle both your finances and your well-being.What Else Should be Part of My Estate Plan?
While a durable power of attorney is an important part of your estate plan, it should not be the only component. A durable power of attorney only addresses financial issues in the event that you become incapacitated. You should also consider protecting your assets and financial health while you are living and also planning for how your estate should be handled upon your death. To do this, you will need other essential documents such as a will and a trust.
A last will and testament is an estate planning tool that most people are familiar with. It allows you to leave property to your loved ones after you pass away. You can leave gifts of cash, stocks, bonds, real property, jewelry, and collectibles to those you care about. You can also indicate in your will who will serve as the guardian for minor children who survive you. With a will you can even make sure that your pets are cared for after you pass away.
A trust is in some ways similar to a will in that it can also be used to leave your loved ones property after you pass away. Trusts have some advantages over a will. For example, trusts allow you to give gifts during your lifetime. At the same time, if you chose to you can retain control over the assets you give away. Also, trusts can be designed to protect your assets from future creditors. This type of trust can be important if one day you must move to an assisted living facility or nursing home and do not want to use all of your assets to pay for it. In addition, a trust is different from a will in that a trust is not subject to probate, resulting in a quicker distribution of assets to your beneficiaries.
You may need additional documents in your estate plan depending on your goals, your family's needs, and the size of your estate. A well thought out plan and properly drafted and executed estate plan documents will ensure that you meet your personal and financial goals for you and your family.
After executing your will, power of attorney, health care proxy and all other estate planning documents, you should periodically review them to make sure that they are still consistent with your wishes. With your durable power of attorney it is important to make sure the person you have named as your attorney-in-fact remains your choice and that that person is still willing and able to take on the responsibility. In addition, consider naming a successor attorney-in-fact in case your first choice is not able to serve.
As you consider how to plan for your future and the possibility that at some point you may need an attorney-in-fact to handle your finances for you, it is important to consult with an experienced practitioner who understands the legal issues related to the appointment of an attorney-in-fact. To learn more about the advantages of a durable power of attorney as well as other estate planning tools, contact Stephen Bilkis & Associates, PLLC. We will help you execute a durable power of attorney, a health care proxy as well as an overall estate plan that reflects your individual goals. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate plan.