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What Is a Power of Attorney, Why Do You Need One, and How Does it Work in New York?

January 4, 2024
David Parker, Esq.
A couple learning about a New York a power of attorney
David Parker, White Plains and New City NY Estate Planning Attorney
David Parker, Esq.
David Parker is an attorney who specializes in Estate Planning and Elder Law and has been practicing law for 30 years. Be it Wills, Trusts, Powers of Attorney, Health Care Proxies, or Medicaid Planning, David provides comprehensive and caring counsel for seniors and their families. A large portion of David’s practice is asset protection strategies so that families do not lose their hard earned savings to nursing home care costs. He also handles probate administration for the settlement of estates.
Contrary to common belief, family members like your spouse or children do not inherently possess the authority to act on your behalf. A power of attorney is a legal document that empowers an individual to appoint an agent to act or make decisions on their behalf when unable to do so.

A Power of Attorney (POA) is a pivotal legal tool for New Yorkers that allows one individual to grant another the authority to act on their behalf. Whether you're planning for the unforeseen future, managing intricate financial affairs, or ensuring that someone can make healthcare decisions for you if you become incapacitated, understanding the nuances of a POA is indispensable. This article dives deep into the realm of POAs, answering vital questions and illuminating its various types and applications.

What Is a Power of Attorney (POA)?

A power of attorney is a legal document that empowers one person, known as the principal, to appoint another, referred to as the agent or attorney-in-fact, to act in their stead. This "power" can be expansive, granting the agent broad authority over various facets of the principal's life, or it can be restricted to specific duties. The power of attorney document outlines the specific powers granted to the agent, which can range from managing financial transactions to making medical decisions. It's essential to understand that the agent must act in the best interest of the principal and within the boundaries set by the POA.

In his video, What is a Power of Attorney, White Plains Estate Lawyer David Parker explains that understanding the significance of a power of attorney is crucial, especially in situations where you might be unable to represent yourself.

Why Do You Need a Power of Attorney?

Contrary to common belief, family members like your spouse or children do not inherently possess the authority to act on your behalf. For instance, consider a scenario involving an Individual Retirement Account (IRA). If an unforeseen circumstance prevents you from communicating with the IRA company, your spouse or children would be unable to interact with them on your behalf unless you have previously designated a representative in writing through a power of attorney. This rule is not limited to financial institutions; it extends to various government agencies and banks, which will not recognize a relative's authority without a legally binding document. In addition, if you become incapacitated and are unable to make decisions autonomously, a POA ensures that a trusted person or entity is able to make decisions about your medical care.

Different Types of Power of Attorney

Several types of power of attorney cater to distinct purposes:

  • General Power of Attorney: Entrusts the agent with broad power to oversee your financial and personal matters. This could include handling bank transactions, paying bills, or managing investments.
  • Limited Power of Attorney: This POA is tailored to a particular task, like facilitating the sale of a real estate property or representing the principal in a specific legal matter.
  • Medical Power of Attorney: Empowers the agent to make health care decisions in your stead, especially when the principal is unable to communicate their wishes.
  • Springing Power of Attorney: This POA becomes operative under specific conditions, often when the principal is incapacitated. It "springs" into action based on the criteria set in the document.

How Can You Create a Power of Attorney?

To institute a power of attorney, the principal must draft a document detailing the powers conferred to the agent. This document should be clear, specific and in accordance with New York state laws. In 2021, there was a significant update to the New York power of attorney form. It's imperative to use the latest state government-issued form and ensure that the POA adheres to all legal stipulations, which can be tailored by an experienced White Plains estate attorney. This updated form carries a notable advantage: if a bank or brokerage firm unjustifiably refuses to acknowledge it, they could face penalties. This is a departure from previous practices where financial institutions could demand their own forms. Once drafted, it often needs to be notarized or witnessed to be legally binding.

How Does a Durable Power of Attorney Differ from Others?

A durable power of attorney persists even if the principal becomes incapacitated. This means that the agent can continue to act on the principal's behalf, even if the principal is mentally unsound. Conversely, a non-durable power of attorney ceases if the principal is incapacitated. The term "durable" indicates that the power of attorney will withstand such scenarios, ensuring continuous representation.

When Does Power of Attorney Become Operative?

A power of attorney can either become operative immediately upon its execution or can be scheduled to commence at a future date or event, such as the incapacitation of the principal. The timing is typically specified in the document itself, ensuring clarity for both the principal and the agent.

Can You Revoke a Power of Attorney?

A principal can absolutely annul a power of attorney whenever they wish, as long as they are mentally sound. To revoke a POA, the principal typically needs to provide a written notice of revocation to the agent and any entities or individuals that might have been given a copy of the POA. It's paramount to ensure that all parties are aware of the revocation to prevent unauthorized actions.

What Decisions Can an Agent Make on Your Behalf?

The decisions an agent is authorized to make hinge on the type of power of attorney and its stipulations. For instance, with a financial POA, the agent might oversee financial transactions, pay bills, manage investments, or handle tax matters. With a medical POA, the agent can make healthcare choices, including treatment options and medical procedures. Read more in our article: Why You Need Advance Directives Right Now

How to Choose the Right Agent for Your POA?

Selecting an agent is a critical decision. It's vital to pick someone reliable, who comprehends your desires and can act in your best interest. Consider their ability to handle complex situations, their understanding of your wishes and their willingness to act as your agent. It is also feasible to designate more than one agent or specify a successor agent, in case the primary agent is unable to serve.

What are the Risks and Benefits of Having a POA?

Having a POA ensures that someone is at the helm of your affairs if you're incapacitated or unavailable. This provides continuity and peace of mind. However, there's an inherent risk if the agent acts contrary to your interests or abuses their power. It's crucial to select a dependable agent, regularly reassess the POA and ensure checks and balances are in place.

A power of attorney is an indispensable component of any New York estate plan, regardless of your financial status or whether you have a will or trust. It's a key tool for managing government benefits and other related matters, ensuring that your affairs can be handled efficiently and according to your wishes. Schedule a free call with Parker Law Firm to create a power of attorney as part of your comprehensive estate plan.

Key Takeaways:

  • A Power of Attorney is a legal instrument that permits one to delegate authority to another.
  • Various types of POAs exist, each tailored to specific needs and situations.
  • A durable power of attorney remains effective even if the principal is incapacitated.
  • It's imperative to select a trustworthy agent and comprehend the powers you're bestowing.
  • Regularly reassess and modify your POA to ensure that it mirrors your current wishes and situations.
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