A power of attorney (POA) is an integral document you should have as part of an estate plan. This document is a tool that gives you the ability to name a trusted individual(s) to access your financial accounts and step into your shoes to manage your assets when you are unable or unavailable. If you are ever incapacitated, this document can be used and should avoid the need to set up a conservatorship. As discussed on May 2, 2017, a conservatorship is a court process where someone is named to step in and manage your finances on your behalf if the court determines you are no longer able to manage yourself. By setting up a POA, you get to choose who you want to be in charge of your assets.
The POA is only valid while you are living. It terminates at your death if it is a durable power of attorney. It is possible however, to create a POA for a limited period of time so that it expires on a certain date. For example, dad gives a POA to his daughter to sign documents to close on the sale of his house while he is out of town on vacation. You can revoke or change your POA at any time as long as you are competent to make the change. Your POA will also terminate when you start proceedings for dissolution, separation or annulment of your marriage (assuming you have named your then spouse to act on your POA).
There are two different POA forms you can use. The Minnesota statutory short form POA and the common law POA. The Minnesota statutory form is by far the most common and widely used of the two. The powers granted under the Minnesota statutory form are spelled out in the statute and include transactions involving: real property, tangible personal property, bonds, banking, business operating, insurance, beneficiary, gift, fiduciary, claims and litigation, family maintenance, benefits from military service, etc. You can select that all powers be granted or just select specific powers. In addition, you can designate specific reporting requirements that your named representative (or attorney in fact) is required to follow.
This type of power of attorney does not give your representative the authority to:
- Make health care decisions for you;
- Execute a health care directive on your behalf;
- Make a will for you;
- Enter into or dissolve a marriage;
- Vote on your behalf; or
- Create a trust for you.
The Minnesota statutory short form POA is widely recognized and accepted in the Minnesota business world. The statute imposes penalties on people who fail to honor them. Third parties can assume that the POA is valid unless they know specifically that it is not.
The common law POA although used less frequently, it can still be an important tool where a client needs more flexibility in their estate plan. This POA can be used to grant greater ability to do gifting, which can be important with larger estates. It also allows you to give different authority to different parties or have different accounting requirements for each party. The common law POA may permit your agent to create a trust for you if needed. Generally, all of the powers are listed in the common law POA. Since it is not governed by statute, there are no penalties for failure to accept a valid common law POA.
Overall the statutory short form POA is sufficient for most clients. It is still important to have a POA that names your spouse to act on your behalf. The fact that you are married does not automatically grant you the authority to sign on behalf of your spouse if they are unable. It is a simple document that is key to any estate plan.
Please send me an email at email@example.com with any topic suggestions or requests you may have. Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know. Our purpose is to educate and we hope that you can take something new away from this column each time you read it.