A comprehensive estate plan is about far more than just transferring your worldly possessions to your heirs. In fact, a good estate plan should be effective even before you pass away. It can be difficult to imagine, but what would happen if you are unable to take care of your financial affairs on your own? Whether as a result of injury, illness, or aging, most of us will reach a point in our lives when we need some help taking care of our financial affairs. That’s where Power of Attorney comes in.
What is Power of Attorney?
You have probably heard this term used before, but what does it really mean? On its face, Power of Attorney is a legal document that allows one person to appoint another and authorize broad legal authority over financial affairs. Financial affairs may include things like paying taxes and bills, accessing bank accounts, and managing real estate. POAs are useful if you (the principal) are ever too unwell to manage your financial affairs by yourself (what’s legally called, “incapacity”).
How Do You Create Power of Attorney?
Power of Attorney is created simply by composing and signing a document that grants this authority. In the State of Georgia, two adult witnesses are required to authenticate Power of Attorney. While it is not required, getting the document notarized is also a good idea.
In order for Power of Attorney to be considered valid, the principal (the person creating the POA) must be “of sound mind.” To be of sound mind, this individual needs to be aware of the powers he is granting and be able to revoke that authorization if he chooses.
Can Power of Attorney be Revoked?
Yes! Power of attorney can be canceled by
1) shredding the document,
2) orally revoking the POA (with a witness attesting to the revocation),
or 3) signing a document that ends the agent’s legal authority.
If, at any point, you determine that you no longer want a particular POA to remain in effect, you can always cancel it, regardless of your physical or mental state.
What Happens if You Don’t Have a POA?
Without Power of Attorney, there is no simple way for your loved ones to step in to handle your affairs if you become incapacitated due to illness, injury, or aging. If you have not taken steps to execute POA and you find yourself in a situation where you are unable to manage your financial affairs, your loved ones’ only option is to go to court. Through a court proceeding called “conservatorship,” a family member or other responsible person can be appointed conservator while you are incapacitated. The conservator has the same rights to manage financial matters as are extended in POA; however, this authority comes with far more strings attached. Aside from the time, expense, and hassle of having to go to court, conservators are also subject to ongoing court supervision. This means that, throughout the time when a conservator is representing your financial interests, he or she would need to report back to the court on a regular basis. One of the biggest drawbacks of conservatorship is your inability to participate in the decision-making regarding who will step in as your financial surrogate. The court determines whether a particular individual is well-suited for the position, even if it is not who you would choose.
What’s This I’ve Heard about a Uniform POA?
In 2017, Georgia adopted the Uniform Power of Attorney Act (UPOAA), joining dozens of other states in simplifying and strengthening protections of POAs. The Uniform POA still does the same thing: it allows one person to grant financial authority to another. However, the UPOAA expands protections for Georgians by protecting against “bad actor agents,” or those who might abuse POAs for their own benefit. This is a troubling problem among those with cognitive impairment, such as dementia. In some cases, the person who is appointed “agent” for the principal may abuse his or her power as financial surrogate. UPOAA is designed to reduce the likelihood of this abuse. It also extends more authority to compel banks to accept POAs, although this still doesn’t work 100% of the time. Before UPOAA, banks generally preferred to use their own Form POAs and would not accept a general POA, despite it being a legally executed document. Banks, from their own perspective, are worried about fraud, so they try to protect themselves and their account holders by managing their own POA processes. Under UPOAA, banks are not supposed to be able to do this, but some do still request their own specific POAs. At Brian M. Douglas & Associates, we always recommend that you reach out to your financial institutions as a part of a comprehensive estate planning process to avoid surprises, conflict, and delay.
If you completed your estate plan prior to July 1, 2017, the UPOAA does not apply to you. Your pre-2017 POA is still legally effective, but it does not carry with it the elevated protections of the post-2017 era. To update your POA and take advantage of the expanded rights, you simply need to revoke your earlier POA and execute a new one.
If You Don’t Have an Estate Plan, POA is a Great First Step
As we’ve mentioned, Power of Attorney is an important part of any comprehensive estate plan. However, it is often a piece of the puzzle that goes overlooked or saved for last. In fact, POA is a great place to start in executing your estate plan. Why? POAs are relatively straight-forward to create, they can become necessary any time and for any number of reasons, and they help initiate the conversation about what you want and who you want involved in your future.
If you are ready to talk POA, give Brian M. Douglas & Associates a call at (770) 933-9009. Our experienced estate planning attorneys are ready and willing to help you get POA executed immediately and to create the exact results you wish. In life, there is plenty that is out of our control. Your financial future does not have to be one of those things.