Understanding the Limits of a Power of Attorney After Death

Takeaways

• Understanding what is and the importance of a Power of Attorney.
• What are the limits of having a Power of Attorney?
• What is the life of a Power of Attorney or when does it end?
• Stay away from a conservatorship.
• What are some things you could do if you don’t have or want a Power of Attorney?

Introduction

When it comes to estate planning and managing affairs, a Power of Attorney (POA) is a crucial legal document. It grants an individual, known as the agent, the authority to make decisions on behalf of another person, referred to as the principal. However, it’s essential to understand that the jurisdiction of a POA has clear boundaries, especially when it comes to the event of the principal’s passing.

What is a Power of Attorney?

A POA is a legal document that allows the principal to appoint an agent to act on their behalf in legal and financial matters. This can include things such as signing contracts, selling property, and conducting business transactions. The authority granted by a POA can be broad or limited, and it may be temporary or enduring. The principal decides what is best for them under their circumstances. For instance, the principal may undergo some type of medical treatment that will prevent them from being fully functional for a period of time. In this case the principal can set up a POA for a limited period and include in the agreement that in the event they become incapacitated, the agent can have full authority of the principal’s legal and financial matters.

Limitations of a Power of Attorney

There are various limitations to having a power of attorney. Knowing and understanding them can help you plan more efficiently. Listed are some drawbacks to having a power of attorney.

• Will Management: Agents are prohibited from altering or revoking the principal’s will.
• Inheritances: Agents are only authorized to distribute inheritances or assets if they are named as the executor of the will or the administrator of the estate.
• Transfer of Power of Attorney: Agents may not delegate their power of attorney to another individual but have the right to refuse the appointment.
• Personal Spending: Agents are forbidden from using the principal’s assets for personal, non-essential expenditures. Misuse of assets for personal gain can lead to court-ordered removal of the agent.
• Euthanasia: Agents do not have the authority to consent to euthanasia on behalf of the principal.
• Medical Decisions: Principals who are conscious and mentally competent retain the right to make their own medical decisions.
• Fiduciary Duties: Agents have a fiduciary duty to act in the principal’s best interests. Breaching this duty, either through action or inaction against the principal’s interests, can result in legal removal by family petition.
• Respect for Principal’s Decisions: Agents must adhere to decisions made by the principal prior to any incapacitation, upholding the principal’s wishes rather than substituting their own judgment.
• Soundness of Mind and Body: The role of a POA agent is to represent the principal’s best interests when the principal is physically or mentally unable to do so.

Jurisdiction of POA After Death

The authority of a POA is based entirely on the principal-agent relationship. When the principal dies, this relationship ceases to exist, and consequently, the POA becomes void. Let me repeat that. When the principal dies, the POA becomes null. This means that the agent no longer has the legal right to make decisions or manage the affairs of the deceased. Thus, the responsibilities shift to the executor of the estate, who is named in the will, or to a court-appointed administrator if there is no will.

What can you do if you don’t have or want a POA?

The principal, in this case you, can put into effect some measures to help manage your affairs. One thing that you don’t want to occur if you’re unable to make decisions or have passed away, is to have your loved ones contend with a conservatorship. A conservatorship is a court-appointed legal status, like a family member, who will manage all your affairs. Having family members involved in your legal matters and estate can create numerous disagreements between the members. In addition, it is a very lengthy process and time-consuming, and involves the Courts. Furthermore, it is more expensive because you would want to hire an attorney specializing in this area. Thus, you should plan ahead in case you’re incapacitated, or for the inevitable event, when you are no longer here. This is especially true if you don’t have or want a POA. Below is a partial checklist to help you get started. Do you have:

1. A will or trust? If so, are they updated?
2. An advance directive such as a living will or health care proxy?
3. Beneficiaries designated to your accounts?
4. Joint accounts?
5. Automatic bill payments?

Types of Power of Attorney

There are various types of POAs. Understanding the differences is vital for both principals and agents.

• General Power of Attorney: Grants broad authority to the agent to conduct almost all legal and financial transactions on behalf of the principal.
• Durable Power of Attorney: Remains in effect even if the principal becomes incapacitated but ends upon the principal’s death.
• Springing Power of Attorney: Becomes effective only under certain conditions, such as the incapacitation of the principal.
• Medical Power of Attorney: Allows the agent to make healthcare decisions on behalf of the principal.

Conclusion

It’s crucial for both principals and agents to be aware of the limitations of a POA. The termination of the POA’s authority upon the principal’s death is designed to protect the estate. It is also there to ensure that the agent honors the principal’s wishes, as outlined in their will or state law. For more detailed information and guidance, refer to a financial advisor or an estate planning attorney.