TABLE OF CONTENTS
- What is a Limited Power of Attorney?
- What is a General Power of Attorney?
- What is a Durable Power of Attorney?
- What is a Springing Power of Attorney?
- Why is a Springing Power of Attorney usually not recommended?
- Important things to understand about all types of Power of Attorney
What is a ‘Power of Attorney’?
A "Power of Attorney" is a written document often used when someone wants another adult to handle their financial or property matters. (Minnesota Judicial Branch)
A Power of Attorney is for the management of your assets during your lifetime – it automatically expires upon your death.
There are two(2) main parties in a Minnesota Power of Attorney.
- The person giving authority/power to someone else is called the “Principal”.
- The person receiving the authority/power is the “Attorney-in-fact” (also less commonly referred to as “Agent”).
NOTE: you can also name a “Successor Attorney-in-fact”. This is someone who takes over if your first choice can’t or won’t do it anymore. However, naming a Successor Attorney-in-fact is purely optional.
The Attorney-in-fact does not to be an attorney. If the Attorney-in-fact makes a decision for the Principal, it has the same effect as if the Principal made the decision themselves.
Even though “Power of Attorney” has the word “attorney” in its title, it does not make its user an attorney. Neither does it give the Attorney-in-fact the power to bring a lawsuit on the Principal’s behalf, nor represent the Principal at court hearings. Only a licensed attorney can represent others at court hearings or bring lawsuits of those whom they represent.
A Power of Attorney is a legal form, it is not a court form. Meaning there is not just one Power of Attorney for every situation – there are countless variations. The wording within different Power of Attorney s can vary for many reasons depending on its intended use.
A Power of Attorney is sometimes referred to as a “Financial Power of Attorney” in Minnesota. This is because a Power of Attorney is usually used to grant someone else the power to make financial decisions on their behalf.
This is opposed to a “Medical Power of Attorney” which grants authority to someone else to make medical decisions on their behalf in the event they themselves cannot. However, the term ‘Medical Power of Attorney’ is rarely used in Minnesota. Instead, MN uses a document called a “Health Care Directive”. Like Powers of Attorney, there are many different versions of Health Care Directives depending on their intended use.
IMPORTANT: creating a Power of Attorney usually does not give someone the authority to make medical decisions on your behalf. Likewise, a Health Care Directive does not give someone else the authority to make financial and legal decisions on your behalf. These are two separate documents – and you should have both.
(Minnesota’s Health Care Directives will be covered in a separate article)
What different kinds of Power of Attorney are there?
There are four main Power of Attorney types:
What is a Limited Power of Attorney?
Limited Power of Attorney only authorizes your attorney-in-fact to make specific financial and/or legal decisions defined by you – usually used for a single event/transaction.
Example: You put your plow truck up for sale. You have a serious buyer, but they won’t have the money for it until next week when they get paid. Unfortunately, you are going out of town for the next two weeks. You can execute a Limited Power of Attorney naming your sister as your Attorney-in-fact so she can meet with the buyer, collect your money, sign the Bill of Sale, and sign over the title on your behalf.
A Limited Power of Attorney becomes effective immediately upon being signed in front of a notary and ends upon completion of the task, upon your decision to revoke the Power of Attorney, or your incapacity or death.
What is a General Power of Attorney?
A General Power of Attorney gives your Attorney-in-fact full authority to make all financial and legal decisions – defined by you – on your behalf.
However, a General Power of Attorney expires if you become incompetent or incapacitated (such as from advanced dementia, Alzheimer’s, or some other health condition that substantially affects your decision-making ability).
Please note that some people who have a dementia diagnosis or other disability may still be mentally competent even with that diagnosis.
A General Power of Attorney becomes effective immediately upon being signed in front of a notary and ends upon your written decision to revoke it, your incapacity, or your death.
What is a Durable Power of Attorney?
“Durable” means lasting. A Durable Power of Attorney gives your Attorney-in-fact full authority to make all financial and legal decisions – defined by you – on your behalf.
However, unlike a General Power of Attorney, a Durable Power of Attorney does not expire if you become incompetent or incapacitated – it "survives’ incompetency and incapacity (such as from advanced dementia, Alzheimer’s, or some other health condition that substantially affects your decision-making ability).
Please note that some people who have a dementia diagnosis or other disability may still be mentally competent even with that diagnosis.
A Durable Power of Attorney is often used in disability planning – whether physical or mental.
For example, if you become unable to freely travel to do errands, your Attorney-in-fact could travel to the bank or county office to complete transactions for you.
Alternatively, your Attorney-in-fact can make financial and/or legal decision on your behalf that are in your best interest if it is later determined you unable due to make those decision on your own due to a finding of incapacity.
But remember, a Durable Power of Attorney does not need to be permanent. The principal can revoke a power of attorney at any time (as long as they are competent).
For example, somebody facing surgery may complete a Durable Power of Attorney to plan in case of a complication, then revoke it when everything turns out ok. Or, if that same person will face a lengthy inpatient hospital or rehab stay, they could leave the Durable Power of Attorney in effect until they are healed and out of the hospital, then revoke it.
However, if there was complication in the above example surgery, a Durable Power of Attorney makes it very easy for your Attorney-in-fact to take over management of your financial affairs immediately upon a finding that you have become disabled or incompetent.
As you can see, a Durable Power of Attorney is a very powerful document. You should only give such authority and power to a person who is honest, trustworthy and responsible.
A Durable Power of Attorney becomes effective immediately upon being signed in front of a notary and ends upon your written decision to revoke it, upon your death, or in rarer cases upon revocation by a court-appointed Conservator.
What is a Springing Power of Attorney?
Unlike the other three(3) Power of Attorney types, a Springing Power of Attorney does not become effective as soon as it is signed by the Principal in front of a notary.
Instead, a Springing Power of Attorney “springs” into effect (becomes effective) upon a specific triggering event – such as your incapacity.
This may seem like the ideal Power of Attorney since it becomes effective only if a specific event occurs (such as upon your incompetency, incompetency, or other conditions you specify); however, due to common potential complications, it is usually not recommended.
Why is a Springing Power of Attorney not usually recommended?
- A Springing Power of Attorney is a sign of trust issues with your proposed Attorney-in-fact.
- A Durable Power of Attorney takes effect immediately when signed in front of a notary – whether or not it is needed immediately. A Springing Power of Attorney doesn’t take effect immediately – indicating there may be a reason you are unwilling to give your Attorney-in-fact immediate authority.
- If you don’t trust your Attorney-in-fact enough now to create a Durable Power of Attorney, what makes you think you can trust them later – especially after you become incompetent or incapacitated?
- Just because you give someone your Power of Attorney doesn’t mean they need to use it before it is necessary. Therefore, if trust is at all an issue regarding your Attorney-in-fact, you should consider naming someone else!
- It can be much more difficult for your Attorney-in-fact named in your Springing Power of Attorney to take over and manage your financial affairs and assets because of the condition that your incapacity must be verified before the Springing Power of Attorney can take effect (likely by one or two agreeing doctors and maybe even only after a court hearing – which can cause expenses and a lengthy delay where all of your finances and assets will be inaccessible).
- Due to the potential problems with verifying Springing Power of Attorney conditions, some financial institutions will be hesitant – and may even refuse – to accept them (potentially requiring a trip to court – adding to the delay and expense)
- Problems can arise when needing to define the specific events needed to trigger, and what documents will be needed to prove your incapacity. If conditions not exactly met, the Springing Power of Attorney is worthless!
It is mainly because of these reasons that a Springing Power of Attorney is not recommended.
You will not run into these problems with Durable Power of Attorney and naming someone you fully trust as your Attorney-in-fact.
Therefore, Durable Powers of Attorney are much more common, and more often recommended, due to the time and expense potentially saved by not having to obtain verification of your incapacity.
Important things to understand about all types of Powers of Attorney:
- All types of Powers of Attorney automatically terminate upon your death – at which point your Executor will take over management of your estate finances and assets (if you were wise enough to also create a valid Will).
- All Powers of Attorney can be terminated by the principal at any time and for any reason (as long as they are competent to do so).
- Powers of Attorney usually only address financial and legal decision-making, not healthcare decision-making (in MN a Health Care Directive is typically used to authorize medical decision-making).
- A Power of Attorney is only for non-Trust assets if you become incapacitated. For example:
- If you already have a Revocable ‘Living’ Trust in place at the time you become incapacitated, your Successor Trustee will immediately take over management of all Trust assets. But, if you have assets that were not placed in your Trust (as is likely), without a Power of Attorney your Successor Trustee will have little to no authority to manage those non-Trust assets.
- In contrast, a Power of Attorney gives no authorization to manage Trust assets – it only authorizes management of non-Trust assets.
- Therefore, it is usually recommended that even if you have a Revocable Living Trust, you also create a Durable Power of Attorney which also names your Successor Trustee as your Attorney-in-fact. With this combination, your Successor Trustee/Attorney-in-fact can manage all assets (both Trust and non-Trust assets) immediately if you become incapacitated.
- Having a Will with a named Executor has no effect while you are living.
- For example, having your brother as your Executor has no effect if you become incapacitated. Being an Executor does not give any authority as to legal, financial, or medical decision-making while you are still living.
Who can create a Power of Attorney?
Any adult who is mentally competent and able to make decisions on their own can make a Power of Attorney in Minnesota.
Mentally competent means that you are “of sound mind.”
If a person is not mentally competent, they do not have the ‘capacity’ to make/sign a Power of Attorney. In that situation, a Guardianship and/or Conservatorship may need to be created.
Please note that some people who have a dementia diagnosis or other disability may still be mentally competent even with that diagnosis.
Your Power of Attorney should have provisions that carefully define what is needed to establish ‘incompetency’ as well as what needs to be established to reverse that finding.
If there is a question of competence you may want to talk to your doctor or health care provider before signing a Power of Attorney.
Able to make decisions on their own:
You must not already be under Conservatorship.
Do I need a lawyer to make a Power of Attorney?
No, you do not need a lawyer to create a Power of Attorney. But it is a good idea to at least consult a lawyer.
As with any legal document, the ‘power’ in a Power of Attorney comes from its wording. The wording will determine what authority your Attorney-in-fact has – and doesn’t have.
Though there are numerous Power of Attorney forms you can get for free online, as the old saying goes, often “You get what you pay for.” There is no single Power of Attorney form that meets all the needs of everyone.
Also, since those seeking a Power of Attorney online are very likely not a lawyer, it is very possible they don’t fully understand everything in the document they are downloading and whether or not it actually does what they want it to.
But by meeting with an attorney to discuss your unique situation, s/he will likely help you to better understand what the specific wording in your Power of Attorney means as well as be more aware of language that needs to be added or amended to customize your Power of Attorney in order to achieve your specific goals.
Additionally, an attorney is likely to make sure you are creating the right kind of Power of Attorney as well as make you aware of additional situations that you may not have thought of which your Power of Attorney should address.
Furthermore, keep in mind that unlike in a Guardianship or Conservatorship situation, the courts do not oversee what an Attorney-in-fact does.
An unscrupulous Attorney-in-fact could use a poorly worded Power of Attorney to take advantage of you!
However, a lawyer can help you put wording in your Power of Attorney that prevents, or at least limits, the damage that can be done by an unscrupulous Attorney-in-fact – such requiring them to show you detailed records on a regular basis of what they do with your money and/or property, as well as send a copy of those records to someone else for additional review.
So even though you are free to download a Power of Attorney from the internet, or even create one yourself, you should at least consult an attorney to review your final version before signing it. Such a consultation will be money wisely spent.
How do I create a Power of Attorney?
Ways people make a Power of Attorney include, but are not limited to:
- Having an attorney make one for you. (highly recommended)
- Using an online websites such as LegalZoom, RocketLawyer, etc.
- Using some sort of 'Will-maker' software or book such as those from Quicken or Nolo.
- Customizing a sample Power of Attorney downloaded from the internet.
- Creating their own from scratch (definitely not recommended!)
If you decide to create your own Power of Attorney, and are not a lawyer, then you do so at your own risk. And please also read the "Do I need a lawyer to make a Power of Attorney?" section of this article, if you haven't already.
But if you are still planning on making your own POA, then please note that the minimum requirements for a Power of Attorney to be valid in MN include:
- Must be in writing;
- Must be properly dated;
- Must be signed by you in front of a notary; and
- Must be clear on the powers given.
NOTE: In addition, as mentioned above, you must be an adult who is mentally competent and able to make decisions on their own before you can create a valid Power of Attorney in Minnesota.
Also, it is important to remember that unless you created a ‘Springing’ Power of Attorney, your Power of Attorney will become effective as soon as it is signed and notarized. Meaning it authorizes your Attorney-in-fact to use it immediately – not only if you become sick or incapacitated.
Another reason you should consult a licensed attorney to assist you is making sure you are creating the right kind of Power of Attorney for your situation and to make sure all the specific language needed to achieve your intended purpose is within your Power of Attorney document.
However, if you are insistent on trying to save money by creating your own Power of Attorney, there are only two(2) sources that I would recommend to Minnesotans – and they both are free.
- This free Minnesota Power of Attorney downloadable form offered from The Office of Minnesota Attorney General. This form:
- Is prepared according to statutory requirements and is therefore fully compliant with MN law.
- Has many options to choose from such as choosing which powers they wish to delegate to their Agent, and identify whether or not their Power of Attorney will be “durable”.
- Before completing the form, the Principal and Attorney-in-fact should carefully read all pages of the form, including the instructions at the top of the first page.
After you finish creating and printing your Power of Attorney document, it must dated and signed by you in front of a notary before it will be effective (usable). NOTE: the notary and your Attorney-in-fact should not be the same person.
In addition, some banks and financial companies have their own Power of Attorney forms. Preparing additional, organization-specific forms may make it easier for your Agent to work with certain organizations with which the principal does business.
Does my Power of Attorney need to be notarized?
Yes, in Minnesota your Power of Attorney needs to be notarized before it can be used.
NOTE: if you are using the free Power of Attorney form offered by The Office of the Minnesota Attorney General, then you must also initial after the ‘Important Notice to the Principal’ section and your Attorney-in-fact must also sign the document in the specified location before they can use it (your Attorney-in-fact’s signature does not require a notary).
Who should be my Attorney-in-fact?
Any competent person over the age of 18 can be your Attorney-in-fact. This includes family members. Many people choose a spouse or child.
You should be very careful to choose someone you trust. A Power of Attorney can be abused and can very well be a legal license to steal when put into the wrong hands!
Furthermore, a Power of Attorney does not provide protection from inexperience, poor judgment or exploitation. Therefore, the person you select as your Attorney-in-fact should be responsible, honest, and diligent.
Also, if you decide to make a family member your Attorney-in-fact, it may be extra important that your Power of Attorney contains language that prevents undoing of any Estate Planning you have in place.
You can list more than one Attorney-in-fact. If you do, it is important to specify what each can do on their own and what decisions or actions need to be made together or with the permission of the other(s).
Lastly, you should also consider naming a “Successor Attorney-in-fact”. This is someone who takes over if your first choice can’t or won’t do it anymore.
Can I have more than one Attorney-in-fact at the same time?
Yes, you can name more than one Attorney-in-fact in your Power of Attorney to act either jointly or independently – however you direct.
Naming just one Attorney-in-fact is usually more efficient and effective for most, there are situations where naming several Attorneys-in-fact may be beneficial.
- An elderly couple, both in their upper 70s.
- They each create a Durable Power of Attorney naming each other and their two children as Attorneys-in-fact.
- Father becomes incapacitated, so Mother assumes their financial obligations.
- Mother’s capacity is questionable, and she is having difficulty managing their finances along with the additional responsibilities of caring for Father.
- Because both Father and Mother also named their children as Attorneys-in-fact, the children can help Mother by taking over her financial duties without having to go to court and prove her incapacity.
- In this scenario, not only would the children be able to seamlessly assist their parents with their finances, but they would also escape the cost and potential embarrassment to their mother by avoiding Conservatorship court hearings.
Because of the high level of trust and cooperation needed for this scenario to succeed, naming a single Attorney-in-fact is generally recommended to avoid costly conflicts.
How much power will my Attorney-in-fact have?
Ultimately, your Attorney-in-fact will only have as much, or as little, power as you give them.
This is why when planning a Power of Attorney, you must decide just how much authority you want your Attorney-in-fact to have over your affairs and precisely which affairs you want to give such authority.
For example, you can create a Limited Power of Attorney to handle just one specific transaction, you can create a General Power of Attorney that expires if you are later become incompetent, you can create a Durable Power of Attorney which will continue even if you later become incompetent, or you can create a Springing Power of Attorney that only begins when specified criteria are met (such as your becoming incompetent).
Additionally, you can choose what transactions your Power of Attorney can, and cannot, be used for. Here are some common examples of transactions you can authorize your Attorney-in-fact to do for you:
- Using your assets to pay your everyday expenses and those of your family.
- Paying your health care bills.
- Opening, closing, and using credit accounts.
- Buying, selling, and maintaining real estate and other property.
- Paying your mortgage and taxes on real estate and other property.
- Managing benefits from Social Security, Medicare, Medicaid, VA, or other government programs.
- Managing your investment portfolio.
- Managing your retirement accounts.
- Handling transactions with your bank and other financial institutions.
- Buying and selling insurance policies and annuities for you.
- Filing and paying your personal or business taxes.
- Operating your small business.
- Buying and selling automobiles, boats, ATV’s, snowmobiles, and other vehicles.
- Claiming property you inherit or are otherwise entitled to.
- Hiring someone to represent you in court
- And more… it’s entirely up to you!
This is a good time to emphasize that due to the wide variety of finances your Attorney-in-fact may be responsible for, it is important to pick someone that is responsible, diligent and whom you deeply trust!
IMPORTANT TO REMEMBER: in MN your Power of Attorney typically only authorizes financial and legal decision making, it does not authorize your Attorney-in-fact to make medical decisions on your behalf! For that, you should use a MN Health Care Directive – which is a separate document. You should have both!
How does my Attorney-in-fact use the Power of Attorney?
First, before using the Power of Attorney, both the Principal and the Attorney-in-fact should have a full copy of the original dated, signed and notarized POA document.
If you are giving the power to sell real estate, a copy of the signed original must be filed at the county recorder’s office in the county where the real estate is located.
If you are giving the power to use or manage your bank or other financial account(s), you should file a copy of your Power of Attorney with each of the financial institution(s) – (also, this is good time to ask your banker to review your POA to ensure they will accept it).
For any other matters, you or your Attorney-in-fact will give a copy to the person, business or organization for their records.
Once a copy of the notarized Power of Attorney has been provided, the Attorney-in-fact’s signature carries the same authority as if the Principal themselves signed the document.
IMPORTANT: When the attorney-in-fact acts for you, they sign their own name and then write, “As attorney-in-fact for [Principal’s name]’:
What duties will my Attorney-in-fact have to perform?
You attorney-in-fact must keep a record of anything they do for you and should only do things that are in your best interest.
The Attorney-in-fact is responsible for keeping records of all the transactions they do for you. This is called “accounting.” You should ask to see these accounting records on a regular basis. Even if you trust your Attorney-in-fact, getting regular accountings on a quarterly or monthly basis is a good idea. It is also a good idea for an additional copy of the accountings to be sent to someone else (like a family member or friend) who can help keep an eye things.
NOTE: In MN, your Attorney-in-fact is not required to provide you with copies of their accounting, unless:
- Requested to do so at any time by the principal;
- The instrument conferring the power of attorney requires that the attorney-in-fact render accountings and specifies to whom the accounting must be delivered; or
- The Attorney-in-fact has reimbursed the Attorney-in-fact for any expenditure the Attorney-in-fact has made on behalf of the principal.
If you Attorney-in-fact will not provide a copy of their accounting when required, or seem to be doing things with your Power of Attorney that are not in your best interest, you should seriously consider revoking your Power of Attorney or replacing your Attorney-in-fact. Any licensed attorney can help you if you don’t know how.
What can my Power of Attorney be used for?
A Power of Attorney may be a good idea for people who have lost or have reduced mobility and so have difficulty getting to important non-medical appointments.
Also, a Power of Attorney is prudent estate incapacity planning in case sometime in the future they ever become unable to manage their financial affairs or make other decisions for themselves.
In these situations, examples of what a Power of Attorney could be used for include:
- Managing a person’s assets to pay their everyday living expenses.
- Managing a person’s assets to pay their everyday living expenses.
- Manage and/or applying for benefits from Social Security, VA, Medicare, Medicaid or other government programs.
- Handling transactions with banks, brokers and other financial institutions.
- Filing and paying a person’s taxes.
- Manage a person’s insurance and retirement accounts.
If you feel your Attorney-in-fact is not doing the things that you need, you should consider revoking your Power of Attorney or changing your Attorney-in-fact. Any licensed attorney can help you if you don’t know how.
Can my Attorney-in-fact make me do things I don’t agree with?
No, your attorney-in-fact cannot force for you to do anything you don’t want to do (as long as you are competent to object).
You will not lose any right to control your property or money. Your Attorney-in-fact cannot tell you where to live, how to live, or how to spend your time.
Your attorney-in-fact’s job is to assist you, not control you. Your Attorney-in-fact is not your Guardian.
An Attorney-in-fact cannot initiate a divorce or create a Will. But is important to ensure the wording in your Power of Attorney prevents your Attorney-in-fact from altering any other Estate Planning you already have in place.
Your Attorney-in-fact is only supposed to do things that are in your best interest. If you feel they are not, you should seriously consider revoking your Power of Attorney or changing your Attorney-in-fact. Any licensed attorney can help you do this if you don’t know how.
What can I do if I am not happy with the decisions my Attorney-in-fact is making?
If you are not happy with the decision your Attorney-in-fact is making, you can revoke (cancel/stop) your Power of Attorney or change who you name as your Attorney-in-fact.
A Power of Attorney is fully revocable. You can revoke or change any part of your Power of Attorney at any time and for any reason (as long as you are competent).
How do I cancel my Power of Attorney?
To revoke (cancel/stop) your Power of Attorney, you must:
- Put your desire to revoke the Power of Attorney in writing;
- Properly date your writing;
- Sign your writing in front of a notary;
- Send copies of the notarized writing to:
- Your Attorney-in-fact;
- Any business your Attorney-in-fact may have done business with; and
- Anyone who you think your Attorney-in-fact might do business with (if you don’t send out copies of your revocation, the people or businesses won’t know, and might still allow your Attorney-in-fact to act in your name).
- If possible, get back the original Power of Attorney you made.
When does a Power of Attorney end?
There are several ways a Power of Attorney can end, including:
- Your death;
- It is important for you and your Attorney-in-fact to both understand that all Powers of Attorney die with the Principal – your Attorney-in-fact cannot legally use it after you pass away.
- It is your Executor who will take over management of your assets and property after your passing (if you were sensible enough to also create a valid Will).
Can my Attorney-in-fact start lawsuits on my behalf, represent me in court, or go to court for me if I cannot go myself?
No, your Attorney-in-fact cannot bring lawsuits on your behalf (ex: sue someone) or represent you at court hearings – even if you are unable to attend them.
The attorney-in-fact named in your Power of Attorney can make legal decisions for you; however, they cannot represent you in a court of law – unless your Attorney-in-fact is also an attorney licensed in the state.
Only licensed attorneys can represent someone in court and bring lawsuits on behalf of those they represent.
Can my Attorney-in-fact vote for me if I cannot make it to the poles?
No, your Attorney-in-fact is never authorized to cast a vote for you in any public election in Minnesota.
If you are eligible to vote but cannot make it to the poles to yourself, check out this MN Absentee Ballot information from the Office of the Minnesota Secretary of State.
Why should I have a Durable Power of Attorney?
You should have a Durable Power of Attorney in Minnesota as part of your disability planning.
It is usually best for people to make their own decisions on matters that significantly affect their lives. Unfortunately, however, many people will become disabled in some form before they pass away (often due to medical or mental health reasons).
Before this happens, it is important for those people to have named someone they trust to make decisions for them. That is the purpose of a Durable Power of Attorney – to assign someone you trust to manage your financial and legal affairs when you no longer can, whether the need is temporary or permanent.
A Durable Power of Attorney is part of ‘incapacity’ planning (along with a MN Health Care Directive). A Durable Power of Attorney ‘survives’ your incapacity – meaning it will continue to be effective even if you become incapacitated. In contrast, a General Power of Attorney expires if you become incapacitated.
Furthermore, if you fail to have a Durable Power of Attorney in place before you become incapacitated, it is likely that Guardianship and/or Conservatorship court hearing will be required. Significant psychiatric and/or medical evidence will likely be required at such hearings to prove you are incapacitated, costing time and money. At the conclusion of the hearings, someone will be appointed as your Guardian and/or Conservator to manage your affairs – someone chosen by the court, not you, and it may not be someone you would have approved.
This is especially true if your incapacity is truly unexpected and you will require long-term inpatient healthcare. In such a situation, your family may need to engage in what is known as Medicaid Crisis Planning in order to save some of your assets from liquidated to pay your healthcare bills.
The time lost waiting for your Guardianship/Conservatorship to be resolved could prove costly! A Durable Power of Attorney will allow your loved ones to avoid the expense and turmoil of the Guardianship/Conservative process.
Additionally, if you may have any prolonged absence from the United States, a Durable Power of Attorney would allow your Attorney-in-fact to seamlessly handle your affairs while you are away.
Thinking ahead by having a Durable Power of Attorney in place means you will have a trusted advisor (often a family member or members) to manage your assets for you, either temporarily or permanently, when you need them to. And don’t forget that you can change or revoke your Durable Power of Attorney at any time and for any reason (as long as you are still competent to do so).
Because of the wide range of potential benefits provided, and problems avoided, it is widely recommended that everyone have a Durable Power of Attorney in place.
Should I have a Durable Power of Attorney even if I already have a Revocable 'Living' Trust?
Yes, you should still have a Durable Power of Attorney in place even if you already have a Revocable 'Living' Trust so your Successor Trustee can manage assets that were not yet transferred into your Trust, should you become incapacitated.
As you are likely aware, if you become incapacitated, your Successor Trustee will immediately take over management of your Trust assets.
However, at the same time, your Successor Trustee will have little to no authority over assets not already in your Trust if you do not also have a Durable Power of Attorney in place.
For example, before you become incapacitated maybe you bought a new car, boat, or other assets not commonly transferred into a Revocable Trust. Or maybe you acquired an asset that you just forgot or didn’t have time to transfer into your Revocable Trust. Without a Durable Power of Attorney in place, your Successor Trustee likely wouldn’t have the authority to sell, transfer, or manage those assets not transferred into the Revocable Trust.
It is also possible that you receive an inheritance, or still have to file a tax return after you become incapacitated. Your Successor Trustee likely would not have access to those funds nor be able to file your tax return without a Durable Power of Attorney naming them as your Attroney-in-fact.
Maybe you will be out the country for some time and you need your Successor Trustee to handle a purchase of an asset while you are away so you don’t miss out on a good deal. A Durable Power of Attorney would allow them to attend the transaction, use your money for the purchase and then transfer the asset into your Trust for you.
Lastly, perhaps there is an emergency situation and your Successor Trustee needs to perform some actions at your bank. It is possible that the banker may not be familiar with your Trust provisions, so will have to send your Trust over to the legal department to have it reviewed to ensure you have the authority to do what you are requesting. This can lead to a costly delay. However, in this situation, if your Successor Trustee also can show the banker a Durable Power of Attorney – which most have seen and do understand – your Successor Trustee can possibly get the needed approval much quicker.
It is important to note that if you become incapacitated, you did not create a Durable Power of Attorney, and you have assets not already in your Trust, the court appointment of a Guardian and/or Conservator may be required in order for someone to gain the authority to manage those assets. Guardianship and/or Conservatorship proceedings can cause a lot of stress and be costly in terms of time and money.
The above are just a few examples and not meant to cover every situation. But I hope I was able to help you understand that you absolutely should have a Durable Power of Attorney as a supplement to your Revocable Living Trust.
Is a Revocable 'Living Trust' better than a Durable Power of Attorney?
Generally speaking, yes a Revocable Living Trust is better than a Durable Power of Attorney – even though in many circumstances they will do the same thing.
Reasons a Revocable Living Trust is better than a Durable Power of Attorney include:
- Revocable Living Trusts are often better understood and more readily accepted by financial institutions – especially if your care requires large changes in the assets they hold.
- Financial institutions may not like the wording in your Durable Power of Attorney, instead preferring their customers use their in-house Durable Power of Attorney form. But if you are already incapacitated, this can cause major problems and/or delays.
- A Durable Power of Attorney can be created by simply downloading a form from the internet and signing it in front of a notary. There is no one verifying that the documents contain all the proper wording, it will do what was intended, or ensures the principal was competent or wasn’t under duress or coercion during its creation.
- A Revocable Living Trust will be part of a comprehensive Estate Plan prepared by an attorney.
- Creating a Trust will require several contacts with the attorney and possibly other professionals over a period of time. This allows the attorney and other professionals an opportunity to evaluate whether or not the client is competent or if they are being subjected to duress or coercion.
- An attorney has a duty to ensure their client isn’t doing anything against their will. These extra safeguards create less skepticism on the part of financial institutions and others when evaluating the legitimacy of the transfer of decision-making power.
- A Revocable Living Trust allows for much more detailed specific instructions to your Successor Trustee about exactly how to manage your asset as well as give a better overview of your overall estate planning theme.
IMPORTANT: Even if you have a Revocable Living Trust in place, you should still also have a Durable Power of Attorney.
Why? Most who set up a Revocable Living Trust name themselves as the Initial Trustee and then also name a “Successor Trustee” (a person who takes over the management of the Trust when the Initial Trustee no longer can). Though your Successor Trustee will have immediate control over your Trust assets if you become incapacitated, the Successor Trustee will have little to no control over non-Trust assets. And it is unlikely that 100% of your assets will be Trust property at the time you become incapacitated.
In being transparent, if you only have a Durable Power of Attorney, there would not be any confusion about what is or isn’t Trust property. However, as stated above, there many other benefits of a Revocable Living Trust more often outweigh this limited exception to when a Durable Power of Attorney may be better.
Additionally, the ‘what is/isn’t Trust property’ situation can also be avoided by setting up the Revocable LivingTrust with a Co-Trustee (someone who has all the same control over the Trust as the Initial Trustee does from the very beginning). But for various reasons, this set up usually isn’t recommended for most (a topic for a separate discussion).
However, if when creating your Revocable Living Trust you simply also create a Durable Power of Attorney naming your Successor Trustee as the Attorney-in-fact, this will close that gap and allow your Successor Trustee to have immediate control over all of your assets when the need arises.
To summarize, having a Revocable Living Trust and a Durable Power of Attorney is far superior to just having a Durable Power of Attorney alone.
Want to learn some other benefits of Trusts which make them a superb Estate Planning tool? Then check out my article Top 14 Benefits of Trusts You NEED to Know in 2020! (opens in a new window)
What powers or control do I lose if I create a Power of Attorney?
You will not lose any power or control of your assets by creating a Power of Attorney and naming someone else to assist you in decision making.
Even though you are authorizing your Attorney-in-fact to make legal and financial decisions for you, you can still make any such decisions yourself. The Power of Attorney simply means that you and your Attorney-in-fact can make those decisions.
Can I use a Power of Attorney for the care of my pet(s)?
Absolutely! A pet is often just as much a part of the family as the humans, and they need to be taken care of, too.
A “Pet Provision” (a section of your Power of Attorney dedicated to decisions related to your pet) in your Power of Attorney will ensure your Attorney-in-fact is authorized to use your money to care for your pet(s) – especially important in case of emergency or if your pet has health issues.
Having a Power of Attorney with a Pet Provision can also prevent Conservatorship proceedings during which your pet(s) will likely be just be classified as “personal property”. It would then be up to a court-appointed Conservator to determine where your pet will go and how much, if any, of your money should be used to continue caring for that “personal property”.
It is relatively easy for most attorneys to add a Pet Provision to your Power of Attorney that specifically addresses the care of your pet(s).
Additionally, here at the Maki Law Firm I can create what is called a 'Pet Trust'. A Pet Trust can be a stand-alone Trust or it can easily be added your Revocable Living Trust.
So if you have a pet, or think you might have one in the future, make sure you ask your attorney about adding a Pet Provision (or possibly creating a 'Pet Trust') to care for your fur-family – after all, they’re part of the family, too!
Can my Power of Attorney be used to give gifts?
Whether or not your Attorney-in-fact can give gifts to others, or even themselves, is important to address in your Power of Attorney.
Not only will this avoid potential in-fighting between relatives, but it can also mean the difference between whether or not you lose a substantial amount of your assets to a nursing home facility, should you ever unexpectedly need it.
So the short answer is Yes, your Power of Attorney should allow gifting by your Attorney-in-fact – but likely not for the reason(s) you expect.
Most think of ‘gifting’ as deciding what and how much money or property to relatives, friends, or other heirs. But gifting can actually play a large role in protecting your assets should you unexpectedly need long-term nursing home care.
When unexpected long-term nursing home care is needed, a final tool in many Estate Planning Attorney’s toolbox is what is often called a ‘Medicaid Crisis Plan’. Medicaid Crisis Planning is often sought when someone unexpectedly needs long-term inpatient healthcare (e.g. nursing home care) but did little to no estate planning ahead of time.
Because of that lack of foresight, the person now in need of long-term inpatient care has too many assets to qualify for MN Medicare so they are at risk of losing a lifetime of work to pay for a few years of nursing home care.
But for a Medicaid Crisis Plan to succeed, broad – yet detailed – gifting authority is needed to transfer some of the person-in-need’s assets.
For gifting of any sort to be allowed using a Power of Attorney, that gifting must be expressly stated within the document. You should be aware that some Power of Attorney forms do not have a gifting provision. Others do have gifting provisions, but not to the extent or detailed enough to allow a Medicaid Crisis Plan to fully succeed. Yet others don’t properly address the issue of ‘self-gifting’ (whether or not your Attorney-in-fact is authorized to transfer property to themselves).
Additionally, your Attorney-in-fact will need to be prepared to show that any gifts they made – to whomever and for whatever reason – were done in your best interest.
Therefore, gifting can play a very important role in ensuring your Power of Attorney is comprehensive and properly drafted. If your Power of Attorney doesn’t properly address gifting, you open the door to family in-fighting as well as potentially losing a substantial sum of money to unexpected nursing home costs.
Properly addressing gifting is another strong to consult an attorney rather than just using a Power of Attorney form you found on the internet.
Why should I pay you to create a Power of Attorney when you already gave me links to free Power of Attorney forms?
Actually, the contents of this article are the answer to that question.
I created this article to help you better understand that a Power of Attorney is very powerful document and there are many ways to make mistakes when creating one yourself!
By having me use a premier estate planning software suite created for Estate Planning Attorneys to make your personalized Power of Attorney, we can assure your unique documents will cover virtually any situation where it is needed.
And rather than spending countless hours online trying to figure out what all the wording means in the Power of Attorney you downloaded from somewhere, I will do my best to explain anything you don’t understand in the simplest of terms.
And as stated previously, you often ‘get what you pay for.’ For example the free Power of Attorney form offered by the Minnesota Office of the Attorney General is 4 pages long (including the instructions and notices), the Powers of Attorney I create average approximately 10 pages.
My Powers of Attorney aren’t longer in an attempt to be more confusing, they are longer in order to be more comprehensive – ensuring virtually all scenarios (foreseen and unforeseen) are planned for.
So if you want a high-quality Power of Attorney of which you can be confident will do what you want, when you want it to, contact me today! You can’t afford to mess this up!
PLEASE NOTE: I applaud your seeking out of Estate Planning information, but this article is for informational purposes only and is not a substitute for actual consultation with a qualified attorney.
You should not act on anything you read here without first consulting myself or another Minnesota Estate Planning attorney. Small details in your unique situation can result in a drastically different outcome.
- Power of Attorney, Minnesota Judicial Branch
- Powers of Attorney, Education for Justice (a project of the Minnesota Legal Service Coalition)
- Financial Power of Attorney, Office of the Minnesota Attorney General
- The End of Lawyers: Thank Goodness!: Estate Planning and the End of Inefficient Lawyers by Jamie Hargrove, Roger Madden
- Revocable & Irrevocable Trusts: Piloting the Maelstrom with a Steady Hand, Michael Markhoff, Esq., Danziger & Markhoff LLP
- Estate Planning; Jill Miller, Jill Miller and Associates, P.C.
- Fundamentals of Estate Planning for the Traditional Middle Class Family, Joseph Pozzuolo, Pozzuolo Rodden, P.C.
- Advising Your Clients on Aging: How to Plan Ahead, Fern Finkel, Esq., Finkel & Fernandez, LLP
- All My Children Wear Fur Coats: How to Leave a Legacy for Your Pet, Peggy R. Hoyt, J.D., M.B.A., B.C.S., Hoyt & Bryan, LLC
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