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Why You Need A Power Of Attorney

posted Nov 13, 2013, 8:00 AM by Lily Aminova   [ updated Nov 20, 2013, 6:31 PM ]

Everyone should think about having a power of attorney. Having one can be more important to you than a will. The power of attorney allows you to pick someone you trust to handle your affairs if you cannot do so yourself. It gives you peace of mind, reassuring you that in an emergency, someone you choose will have the authority to act for you. The key players in a power of attorney arrangement are the person requesting the help (called the “principal”) and the person providing the help (called the “attorney-in-fact” or sometime, the “agent”). The attorney-in-fact doesn’t need to be an attorney at all. But he or she should be a trustworthy person close to the principal. A power of attorney might pay bills, buy or sell a house or car, begin or end a contract on behalf of the person who’s given him or her the power. The arrangement can be short-term—while a person is touring Europe—or long-term—once a person becomes incapacitated.

    We often have clients come into our office assuming that just because their assets are titled jointly with their spouse, parent or partner, that they are able to liquidate accounts to pay bills, hire attorneys, sell their jointly titled real estate, etc. Unfortunately, that isn’t the case. In fact, we recently had a client come into our office who had a jointly titled investment account with his wife whom had just entered a nursing home. Without going into great detail, he did not have a power of attorney for his wife and he was unable to transfer the assets into his name to do some Medicaid planning. Instead, he had to petition the court to become his wife’s Guardian, costing him thousands of dollars on her nursing home care and legal fees. This all could have been avoided had she had a proper power of attorney.

    Many people have a fear in trusting such an important power to anyone thinking they can abuse their power. The most important way to reduce any risk is to choose your agent carefully. Select someone you trust completely. Never forget that you are giving your agent the opportunity to access your funds at a time when you may not be able to keep tabs on what the agent is doing. So the person must be very trustworthy. There’s are safeguards you can put in place so that someone can check up on what your agent is doing when you cannot.

    If you don’t have a power of attorney and you are suddenly incapacitated, your family may have to go through an expensive and time consuming court action to appoint a guardian or conservator to make decisions for you. Having a court appointed guardian, possibly a stranger, under court supervision and often without the ability to have any input. In other words, the person literally loses financial control. An act as simple as taking money out of a bank account will not be allowed if you do not have a power of attorney.

    In contrast to a court proceeding, a power of attorney is inexpensive and can either take effect immediately or when a person is no longer capable of handling his or her affairs, without court intervention. A power of attorney also is more flexible since you can give your agent whatever powers you desire, including the power to make gifts.

    For those people that already have power of attorney document, the document does not expire unless the document includes a specific expiration date. However, the older a power of attorney is, the more likely it is that a financial institution will refuse to accept the power. Banks, brokerage houses and other financial institutions often raise objections to powers of attorney on the basis that they are stale.

    When people do decide to execute a power of attorney, more often than not people use statutory powers of attorney because they think it’s inexpensive and as effective. It is definitely better than not having one. However, the statutory form does not include the power to make gifts and may not include other useful powers. Therefore, we recommend that a more complex power be utilized and most of the times power of attorney can be customized for each individuals purpose. A lawyer will ensure the agreement is detailed enough for your desires. Together you and the lawyer will determine the list of duties to be performed, when they should begin, how long they should last. Using a lawyer ensures the principal’s rights are protected and that the agreement is legally sound.

Lily Aminova, Esq., is the founding principal at Aminova Law Firm, P.C. with offices in Midtown Manhattan and Queens, NY. Lily can be reached at (718) 618-9900 or at