One of the most basic components of a comprehensive estate plan is the Power of Attorney (commonly referred to as a “POA”).
A person can become incapacitated or disabled at any point in time and without advance notice. An incapacitated person who has not executed a valid Power of Attorney may have difficulty in paying bills and otherwise maintaining his or her standard of living. The POA allows a specified individual (often referred to as an agent or attorney-in-fact) to act on behalf of the person to help maintain assets and the financial well-being during a period of disability or incapacity.
Without a Power of Attorney, usually the more tedious guardianship process must be explored by someone who is willing to step in and act. Some people believe that co-owning bank accounts eliminates the need for a POA (or guardianship). Such an approach, however, does not grant the authority to control all of the person’s financial or liquid accounts, transfer real estate for estate planning purposes such as Medicaid qualification or to pay down debt, to access a safe deposit box, or do a variety of other tasks that would be necessary under the circumstances. Furthermore, the joint ownership approach can drive a wedge between heirs or beneficiaries who are entitled to inherit when all control is given to one person without oversight.
This document usually allows a specified, trusted individual to serve as an agent to sign checks, receive assets, borrow and lend money, sign tax returns, institute or defend legal actions, convey real or personal property, exercise options related to life insurance, and otherwise deal with financial affairs of the principal (the person who establishes the power of attorney).