Creating a Power of Attorney for Finances in New York

Although difficult to talk about, death or incapacitation is ultimately inevitable, and it is important to have a plan in place directing how our affairs will be handled once we are gone. When was the last time you thought about your own estate plan? There are three aspects all good estate plans should include when handling power of attorney:

  • Planning for how one’s assets and minor children will be taken care of after they pass away – this is done through the last will and testament
  • Planning for how one’s healthcare will be managed if they ever become so ill that they cannot communicate with doctors – this is done through the advance directive
  • Planning for how one’s finances will be managed if they are ever incapacitated or otherwise unable to manage their finances themselves – this is done through a durable power of attorney

While most people have planned for how they want their affairs handled, have they stopped to think about who will execute the plan, if not them? This is where durable power of attorney comes into play in New York state, our main focus in this article.

What is a durable power of attorney? How is it created? And what should one be aware of when trying to designate a power of attorney? This article will answer these questions and address the sensitive, but necessary considerations that go into making this selection

What is a power of Attorney?

Power of attorney is an estate document created by an estate owner – referred to as a “principal” – allowing another person to act on their behalf. This person is referred to as an “agent”, or less commonly “attorney-in-fact.” In New York, power of attorney can be granted over finances.

In New York, there are four main types of power of attorney. General power of attorney is the most wide-ranging, but is terminated when it is revoked or the principal dies or is otherwise incapacitated. Limited power of attorney simply grants power of attorney to an agent in a very limited and temporary capacity. Springing power of attorney grants an agent power of attorney only when a certain, specific event happens, such as if the principal leaves a job or moves out of the country. Moving out of the country can result in costly delays for financial decisions or tasks that may require immediacy. The fourth and main focus on this article, however, is the durable power of attorney.

The word “durable” is often included to demonstrate that the power of attorney survives beyond the death or incapacitation of the principal. The primary purpose of the durable power of attorney is to make sure a trusted agent is able to make decisions on behalf of, and in the best interest of the principal when they are physically unable to make decisions themselves.

Why Would Someone Need a Power of Attorney?

If a principal is incapacitated, their assets and liabilities still exist and are still associated with that person. They will need help managing financial matters during this time, regardless of whether it is temporary or permanent.

Let’s say Billie, a woman in her 40s, gets into a car accident and falls into a long-term coma. Billie has a house, a small business, and complicated finances that are normally handled by her. All of these responsibilities will continue to require someone’s attention while she is unable to do them herself. Just some of the things Billie normally handles are:

  • Making timely mortgage payments
  • Paying vendors and employees to maintain her business
  • Managing government benefits for her and her small business

To ensure that these things will still be taken care of, Billie will need a trusted person to withdraw or deposit money from a bank account, pay vendors and employees, and monitor her investments. If Billie had a durable power of attorney created before her accident, all of the above tasks would be handled by her trusted agent.

What Happens if No Power of Attorney Exists?

Let’s return to Billie’s scenario. If Billie had not created a durable power of attorney before her accident, her situation would become incredibly complicated and costly. In New York state, it is not always the case that a spouse, child, parent, or other close relative will automatically have access to financial information and decision making power on behalf of the principal.

Without someone to make decisions on Billie’s behalf, she risks missing payments on her mortgage, losing government benefits, losing insurance coverage, and losing her business. Undoubtedly, Billie and all those in her life would be in a much better position if she had created a power of attorney ahead of time.

While Billie’s life may not be identical to everyone else’s, it’s safe to assume that at least one of her financial worries would be faced by others. Most people would need help managing stock portfolios, or making rent, mortgage, or car payments if they are incapacitated.

In New York, there is a tremendous amount of flexibility offered to principals in designating durable power of attorney. Power of attorney can be as sweeping as granting an agent authority to act over all financial, estate, and health care needs, or as specific as only requiring an agent to maintain mortgage payments on a house. While it is possible for anyone to create power of attorney, it is recommended that a principal work with an experienced estate attorney. An attorney will know what questions to ask when determining how broad or narrow a power of attorney should be, as well as helping to decide who is best suited for the job.

When Does the Durable Power of Attorney Go into Effect?

The two main options for the durable power of attorney going into effect are:

  • Immediately upon signing the document
  • Only when the Principle is incapacitated

If the durable power of attorney is granted only during the event of incapacitation of the principal, it becomes “springing,” a term we defined above.

When determining which option should be selected, the principal must address a series of important questions. The first and foremost question to address is: Who should be their agent? Regardless of how much access the principal wants the agent to have, the agent must be someone the principal trusts. In many cases when the durable power of attorney is executed, the principal is in a vulnerable position and the agent must act in the best interest of the principal alone.

Why might a person give power of attorney to a trusted agent before they become incapacitated? Well, in some cases, the principal might know they will become incapacitated in the future, typically in the case of terminal illness or mental health diagnosis. Because of this, the power of attorney might need to be granted to an agent before actual incapacitation of the principal. If this route is chosen, the agent will have full power of attorney upon signing of the document and can immediately begin managing finances on behalf of the principal.

If the principal decides to grant durable power of attorney before they become incapacitated, at least one physician must confirm that the principal lacks the capacity to manage their own affairs. This medical confirmation can cause delays in attending to financial matters that require immediate attention. Obviously, granting immediate power of attorney carries with it many risks and considerations. It is of utmost importance that an estate attorney be consulted when making this decision so any red flags or potential issues can be addressed before everything is finalized.

How is a power of attorney Created or Revoked?

In New York, a New York Statutory Short Form must be completed to create a power of attorney. The form must be signed and dated by the principal and acknowledged by a notary. It also needs to be signed by the agent in the presence of a notary. Additionally, two witnesses must be present for the signing; however, both witnesses must be “disinterested parties”, meaning they cannot be named in the agreement nor benefit from the agreement in any way.

There are two main ways to revoke a power of attorney. The first is by including a term within the original document outlining the end or termination of the power of attorney by date or specific event, such as the principal regaining the capacity to act on their own behalf. If there is no such term in the original document, the principal can also deliver a “Deed of Revocation” by sending a signed and dated revocation by mail or email.

Keep in mind that creating a valid deed of revocation does not instantly revoke the power of attorney. The deed must be delivered to the agent, so until that time, the agent is legally allowed to continue to execute the powers granted to them in the original document. Putting together a valid revocation can be done quickly with the help of an experienced estate attorney.

Why Hire an Attorney?

It’s always difficult to contemplate one’s possible future incapacity and how to deal with managing one’s affairs when this occurs, but planning for this situation ahead of time is much more favorable than leaving your family to deal with it while also suffering the distress of having a family member with ailing health.

At Rosenblum Law, we’ll work with you to create a plan that covers all of your bases and leaves your family prepared to take on any situation and manage your affairs in the way you wish. Call us today to get started with a free consultation with one of our experienced estate planning attorneys.

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