A Power of Attorney allows you to designate another person (an “agent”) to handle your financial transactions for you should you become incapable of handling your affairs. Without a Power of Attorney, relatives or friends of an incapacitated person may have to go to court to obtain the power to act on behalf of the incapacitated person. The court proceeding, called a “conservatorship,” is time consuming and costly.
Another way you can make provision for the handling of your affairs should you become incapacitated is through a living trust. People usually think of the living trust only in connection with death and the passing of property to a person’s heirs without probate. However, a well-written living trust should also provide important provisions which give the successor trustee the power to deal with the trust property should the person who created the trust become incapacitated. If the trust has appropriate provisions for dealing with incapacity, a conservatorship proceeding can be avoided even if there is no Power of Attorney.
A complete estate plan will have both a Power of Attorney and provisions for incapacity in the living trust. Both documents are usually written so that the agent takes over only when certain persons (either one or two doctors, the designated agent, or a council of interested persons such as family members and friends) sign a notarized statement giving the opinion that the person is incapacitated. Generally, provision is also made for the incapacitated person to resume handling of his or her own affairs if capacity is restored. For practical purposes, the same person should be designated to act as agent in both the Power of Attorney and the living trust and there should be no contradiction in the powers given.
You might wonder why you need a separate Power of Attorney if you have a living trust which provides for incapacity. The reason is that the living trust only covers property that has been put in the name of the trust. It has absolutely no effect on property that is not in the trust. Property may be left outside of the trust on occasion through inadvertence. Sometimes property is left out of the trust intentionally because of the nature of the property. Whatever the reason, it is wise to have both a Power of Attorney and provisions in a living trust to handle your financial affairs, should you become incapacitated.
© 2023 by Marlene S. Cooper. All rights reserved.
(You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).