My wife and I reveiwed and updated our estate plan recently.

We go through this process every five years unless we experience a life-changing event or the estate/tax laws change.

One of the must-have estate documents for most people is a Power of Attorney (POA).

This document can have significant implications for both you and the person to whom you grant this authority.

To help you understand these implications, I'm sharing the following in today's email:

• What is a POA (+ what are the different types)
• What are the responsibilities of a POA
• What a POA cannot do

I'm also sharing a free resource to help you take action!

But first...did you catch this week's podcast episode?

5 (Surprising!) Facts About Planning & Investing ​One stat highlights a "market indicator" with a 100% success rate. Another emphasizes a growing insurance risk. Along with being entertaining, these stats are important reminders for everyone. Listen Now →

What is a Power of Attorney (POA)?

A Power of Attorney (POA) is a legal document that grants a person (referred to as the agent or attorney-in-fact) the authority to act on behalf of another person (the principal).

The extent of this authority is explicitly outlined in the document you create.

It can range from very broad, sweeping powers to limited authority for specific circumstances.

There are different types of POAs:

1. Immediate POA: This goes into effect as soon as it is signed.
2. Springing POA: This only becomes effective if the principal loses capacity and is less favored because proving incapacitation can be challenging.

It’s crucial to understand the specific terms outlined in the POA document you create, as this will dictate the responsibilities and powers of the person you name.

What Are the Responsibilities of a POA

Naming someone as a POA means they have the legal authority to act on your behalf.

This role is often utilized when you become ill, disabled, or are otherwise unable to manage your affairs.

Without a POA, a court may be left to decide what happens to your assets if you are found to be mentally incompetent, and the court's decision may not align with your intentions.

Here are some common responsibilities a POA may be expected to undertake:

• Financial Management: Oversee and manage your financial affairs.
• Bank Accounts: Have direct access to and manage your bank accounts.
• Insurance Decisions: Make decisions regarding your insurance policies.
• Estate Documents: Maintain possession of and manage your estate documents.
• Tax Returns: File your tax returns.
• Safe Deposit Box: Access and manage items in your safe deposit box (if applicable).
• Real Estate Transactions: Sign documents related to the sale or purchase of your real estate.
• Detailed Record-Keeping: Keep meticulous records of all financial transactions, including bills paid, assets sold or traded, and income collected. POAs can also document their own expenditures if they plan to seek compensation for their efforts (e.g., saving gas receipts, mileage, etc.).

What a POA Cannot Do

While the POA grants significant authority, there are limits to what they do:

• Write, Amend, or Revoke Estate Plans: In most states, a POA cannot write, amend, or revoke a will, trust, or other estate planning documents.
• Vote on Your Behalf: They cannot vote in public elections on your behalf.
• Make Decisions Beyond the Document: They cannot make decisions that are not explicitly stated in the POA document.
• Transfer Assets to Themselves: They cannot transfer your assets into their own name unless explicitly authorized.
• Borrow or Lend Money: They cannot borrow or lend money on your behalf unless the POA document specifically grants this authority.

Durable Power of Attorney

One important aspect to understand is the concept of a "Durable" Power of Attorney.

A Durable POA remains in effect even if the principal becomes physically or mentally incapacitated.

This means that the responsibilities and authority of the POA named will continue regardless of your health status.

Without this durable component, the POA's role ceases if the principal becomes incapacitated.

Continued Learning:

• ​Everything You Need to Know About POAs (Trust & Will)​
• ​6 Must-Have Estate Planning Documents (Investopedia)​

Planning Checklists:

• ​What to Consider When CREATING Your Estate Plan​
• ​What to Consider When UPDATING Your Estate Plan​
• ​What to Consider When REVIEWING Your Estate Plan​

Final Thoughts

Naming someone as your POA is an important step in the estate planning process.

It is essential to fully understand the scope of their authority and the duties you are expecting them to perform.

If you don't have a POA, please consult with an attorney to determine if it is fitting for you.

If you do have a POA, regularly review the document with an attorney to ensure it continues to satisfy your intentions and that you understand the assigned responsibilities and limitations.

Thank you for reading! Please reply to this email with any questions.

Stay wealthy,

Taylor Schulte, CFP®