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Powers of Attorney: How Far Can You Go With Estate Planning?

Many of us consider a Power of Attorney (or “POA”) document essential to the estate plan. The document is utilized while the donor (or “grantor”) of the power is alive and usually incapacitated. The POA is distinguishable from a will, which takes effect on death. The question often arises as to what extent a person named in a POA (the “attorney”) can engage in estate planning on behalf of the donor of the power.

Powers of Attorney: How Far Can You Go With Estate Planning?

Many of us consider a Power of Attorney (or “POA”) document essential to the estate plan. The document is utilized while the donor (or “grantor”) of the power is alive and usually incapacitated. The POA is distinguishable from a will, which takes effect on death. The question often arises as to what extent a person named in a POA (the “attorney”) can engage in estate planning on behalf of the donor of the power.

A power of attorney document may state that it is only to become effective when the grantor becomes incapable of managing their property. Proof is then required to determine if the grantor is incapacitated. To avoid providing proof, a power of attorney is often effective immediately. The grantor must therefore trust that the attorney will not misuse the power or the grantor may have the document held by a third party, such as a lawyer, with specific instructions not to release the document until a certain event occurs. Often this includes obtaining a doctor’s report confirming incapacity.

There are many important issues and considerations facing an attorney once they step into the role conferred upon them through a POA. Persons acting under a POA must keep in mind that the incapable person has not yet died. The assets are still the donor’s assets, and unless clear benefit can be shown, without risk or detriment to the incapable person, transactions, which dramatically alter the affairs of the person, will not be permitted.

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