Anatomy of a Power of Attorney
You are probably aware of the fact that a power of attorney is a legal device that is used to appoint someone to act on your behalf in a legally binding manner. In legal jargon, the person who creates the power of attorney is called the principal or grantor. The representative that is appointed to act on behalf of the grantor is called the agent or attorney-in-fact.
Limited and General Powers of Attorney
The grantor of the device has the ability to control the extent of the power that is being granted. A limited power of attorney can be executed to give the agent the power to act on behalf of the grantor on a limited basis. The extent of the limits would be clearly stated in the document.
A general power of attorney would give the agent broad latitude to act on behalf of the grantor. The agent could essentially do anything that the grantor could do.
The date of termination is entirely up to the grantor of the power of attorney. For example, you could give someone the power to act on your behalf while you are conducting business out of the country for three months. You could have the power terminate upon your return date.
In the field of estate planning, durable powers of attorney are often used to account for the possibility of incapacity.
Since you don’t know if or when you will become incapacitated, you would probably want your durable power of attorney to remain effective until the time of your death.
After you die, the power of attorney will no longer be in effect. As a result, if you were to execute a durable financial power of attorney to account for incapacity, the agent would not be empowered to administer your estate.
Revocable Living Trusts
When you recognize the fact that a durable power of attorney will no longer be in effect after you pass away, you may wonder if there are other more versatile solutions.
A revocable living trust is an effective estate planning tool, but it could also be used for incapacity planning purposes.
The trustee that you name in the trust agreement could be empowered to manage the trust if you were to become incapacitated, and this individual or entity could also administer the trust after your passing.
Schedule a Consultation
If you would like to learn more about powers of attorney and living trusts, send us a message through our contact page to set up a consultation: Sacramento CA Estate Planning Attorneys.
Latest posts by Timothy P. Murphy (see all)
- Income Tax Basis - October 17, 2019
- How Do I Disinherit Someone? - October 15, 2019
- Use Trust Protectors for Added Protection and Flexibility - October 13, 2019