Responsible estate planning should not focus solely on what will happen after you die. Before you even get to that point, you must ensure that your wishes will be followed by giving a trusted party power of attorney.
It is important to fully grasp the concept of power of attorney so you can understand how to utilize it properly. After learning more about it, you may realize that this document is something you need right now.
Let’s use this article to go in-depth on the above-mentioned topic. We will also take the time to discuss the different powers of attorney that you can obtain in the state of New York.
What Is Power of Attorney?
Before we get into the different types of powers of attorney, let’s first take the time to define that concept.
Power of attorney is a legal right you bestow upon another person or several individuals. It is also a legal document that you often must present first before using it.
If you are the person granting power of attorney, then you are the principal. The person who receives power of attorney is the agent.
The agent’s job is simple. Their main task is to act on their responsibilities as indicated in the document. They are free to take any action on your behalf as long as the document gives them that authority.
We will get to the different responsibilities you can give your agent in a little bit.
Speaking of those responsibilities, you need to be careful when handing power over to your agent. Be as detailed as you can be when outlining what they can do so you can avoid inadvertently signing over too much responsibility to them. The last thing you need is an out-of-control agent wreaking havoc on your personal affairs.
The Different Types of Powers of Attorney Based on Matters Covered
There are several types of powers of attorney that you can provide to your agent in the state of New York. If you are going by matters covered, there are two powers of attorney that you can grant to your agent. One is a medical power of attorney, and the other is the financial power of attorney.
As you can see, both documents cover important matters. You cannot afford to take either one lightly.
Medical Power of Attorney
First off, let’s discuss the medical power of attorney. This is also known as a health care proxy in New York State.
The details in a health care proxy include the names of the principal and the agent. The document must also carefully detail the wishes of the principal.
To be more specific, the document must clearly state what the principal wants the agent to do. Indicate the decisions that you are authorizing your agent to make. You should also carefully detail any restrictions you want to impose on your agent’s authority.
A medical power of attorney only takes effect when the principal has become incapacitated. Until then, the principle will handle all medical decisions.
The health care proxy can expire in two different ways. It may first expire based on a specific date written in the document. Once that expiration date arrives, the agent will lose all rights to make medical decisions on behalf of the principal.
The document in question may also expire if it becomes revoked. Revocation is typically the only way to render a health care proxy useless if the principal neglected to include an expiration date.
Financial Power of Attorney
The financial power of attorney is something you can take full advantage of even if you are far from retirement age. It works much in the same way that medical power of attorney does in the sense that you are granting someone the ability to make decisions on your behalf. Of course, the related decisions this time around are focused solely on your finances.
Agents given financial power of attorney can complete all kinds of important transactions. Whoever you select as your agent can check balances for your different bank accounts. They can also manage your investment accounts and file your tax returns.
You can also ask your agent to sign or mail checks. Some principals even give their agents the authority to sell real estate properties.
Older individuals may also authorize their agents to receive their retirement benefits and deposit any Social Security checks. They can even change who will be your death benefit beneficiaries, even if they are among the individuals who stand to gain something from that.
As you can see, the financial power of attorney is a powerful tool. If you often find yourself short on time due to your business commitments, giving a confident financial power of attorney could be a beneficial decision long term.
Be sure that the agent you are entrusting with that power is someone who will always have your best interests in mind.
The Different Types of Powers of Attorney Based on Responsibilities Granted
The scope of responsibilities can also be a differentiating factor when it comes to powers of attorney. This time around, you can give your agent either a general power of attorney or a limited power of attorney.
Find out how those two powers of attorney differ by continuing below.
General Power of Attorney
Giving your agent general power of attorney means you are granting them the opportunity to make decisions on your behalf without hardly any restrictions. The only real restrictions they must abide by are by the state.
They set up many financial powers of attorney this way because it simplifies matters for the principal. The principal does not need to constantly sign off on the deals being made by their agent because the latter already has general power of attorney. The party your agent is dealing with already knows they have your blessing, so they can also move forward confidently on any deals.
A general power of attorney can be helpful if you are running a small business. It can allow you to get more things done since you do not need to be physically present to finalize every important deal.
Limited Power of Attorney
In contrast to general power of attorney, limited power of attorney significantly narrows down the list of things an agent can do for you. That is because this type of power of attorney only takes effect when it meets certain conditions.
For example, you may give someone power of attorney to control a specific bank account while you spend the next year working overseas. In that case, you may decide that your agent can only withdraw money from the bank account you are wiring money to from your current base of operations. Your other bank accounts will remain off-limits to them.
As the principal, you can also indicate in the document that the privilege is only effective until you are back in the country. The moment you get back home, your agent will have no authority to access any of your bank accounts.
Limited powers of attorney may be preferable simply because they offer more protection. Consider your situation carefully because this type of document may suffice for your needs.
The Different Types of Powers of Attorney Based on Length of Effectiveness
Lastly, we can also differentiate powers of attorney based on how they take effect and how long they will remain effective. The two types of powers we are highlighting here are durable and springing powers of attorney.
Durable Power of Attorney
Power of attorney may remain in effect even after the principal named in the document becomes incapacitated. That is the case with durable powers of attorney.
An agent with this type of power can keep completing transactions on behalf of the principal regardless of the latter’s current state. Instead, this power of attorney may only expire if it meets specific conditions. Petitioners can also fight to have an agent’s durable power of attorney revoked, but that will be easier said than done.
You cannot expand the responsibilities of an agent with a durable power of attorney as long as the principal is incapacitated. Even if they can keep making certain deals, they cannot do anything more than the document allows.
Springing Power of Attorney
Springing powers of attorney only take effect once some kind of medical event occurs. Typically, the principal must be incapacitated before this particular becomes effective. The principal may also craft the document carefully, so it only becomes usable if they are disabled in certain ways.
Note that you can use a springing power of attorney for medical and financial decisions. Be careful who you give this power to and avoid mistakes while composing it. Work with a lawyer to ensure that the document turns out exactly how you want it to.
Who Should You Choose as Your Agent?
Now that you know more about the different powers of attorney, you should have a clear idea of what privilege you need to grant to another party. Even so, you may have some trouble identifying who your agent should be.
The law does not place many restrictions on who can serve as an agent. Anyone can be an agent as long as they are of legal age and fully capable of serving in that role.
Many principals choose a close relative as their agent. They may go with their spouse, or a sibling or they may choose their child. You can also choose one of your friends if you believe they will always keep your best interests in mind.
Note too that you can choose co-agents to manage your affairs. Appointing more than one agent to handle your estate is a good idea if you need to get a lot of work done. The co-agents can split the responsibilities between one another and finish faster.
Of course, there is also a downside to naming co-agents. If the people you chose as co-agents have a tough time getting along, every decision regarding your estate may be a painful and difficult ordeal. Your beneficiaries may wait a long time before they get their share because your co-agents are too busy arguing with one another.
In some cases, hiring a third party to serve as your agent is the easiest way to deal with that matter. You will need to pay them for their services, but at least they will get the work done according to your wishes.
How Do You Provide Power of Attorney to Your Agent?
The process of signing over power of attorney to another person is simple enough. New York State even allows residents to complete that process online.
You can head over to the state’s website, log in to your account, and select Power of Attorney from the Services menu. After that, you will need to select File a Power of Attorney from the next menu.
From there, it is as simple as filling out the required fields, printing the form out, and signing it. Once you sign the form, you can scan it, then attach the document before submitting it to the website.
We encourage you to send the file to your attorney before submitting it. That way, your attorney can review the document for any errors. If they give you the green light, then send it to the relevant department.
They will process power of attorney forms submitted online within one business day, so that is the route you should go if you need that document as soon as possible. Processing forms submitted through the mail usually takes 7 to 10 business days.
We at the Alber Law Group are ready to help you sort out your power of attorney documentation. Reach out to us today and let us guide you through that important bit of business.