What is a Property Power of Attorney (“Property POA”)? Such document allows a person, called the principal, to delegate to another person, called the agent (often a family member or trusted friend), the power to make decisions regarding assets, finances, bank accounts, and other types of property, including real estate (generally excluding assets in Living Trusts). The agent, who does not need to be an attorney, will speak for the principal and make decisions according to the principal’s wishes even when the principal is physically or mentally incapacitated. The Property POA may become effective when it is signed OR at some future date (such as medical certification of disability).
What are the advantages of having a Power of Attorney for Property? A Property POA is a way for you to decide in advance who will handle your financial affairs if you are disabled and not able to act on your own in the future.
Executing this document will save your family from the burden of having to make financial decisions without knowing your wishes. It gives you (rather than the courts) more control over your life.
A Property POA is a flexible document. It helps assure that your agent’s authority will be honored by others at the time any delegated power is exercised. You can give either limited or broad financial decision-making authority to your agent, depending upon your needs. For example, you may want your agent to have the power to authorize real estate and stock transactions; to handle banking, tax or other types of business matters; to represent you in court; or to address other types of legal claims.
For many smaller estates, a Will, Property POA and Health Care Power of Attorney (“Health Care POA”) combined with joint tenancy ownership and appropriate beneficiary designation planning, may be all the estate planning documents needed. However, a Will and Property POA does not replace a Living Trust because the Living Trust is useful for other reasons such as avoiding probate (and generally a Living Trust is easier to administer for a loved one's benefit during incapacity).
Who may be designated as an agent under a Property POA?
Any person age 18 or older may be designated as your agent. He or she should be someone you know well and can fully trust with handling your financial affairs. It is a good idea to pick someone who lives in a nearby area.
What is the responsibility of an agent under a Property POA?
An agent must use due care and act in accordance with the terms that you have specified in your Property POA. He or she may be liable for any negligent exercise of the duties that you have specified.
When should you designate an agent under a Property POA?
The best time for you to designate an agent under a Property POA is right now, long before you anticipate anything happening to you. This will ensure that your financial affairs will be handled if you are not able to act on your own in the future.
How long will your Property POA last?
As the principal, you can specify the time at which the Property POA will begin and terminate. However, unless you state an earlier termination date, the Property POA will continue until your death. In addition, you can sign and date a written amendment (or execute a new Property POA) to make changes to this document at any time, provided you still have the legal capacity to make such a decision.
Other things to consider:
Before executing a Property POA, you should talk to the person whom you want to be your agent and review how you would like your financial affairs to be handled in the event that your agent must exercise his or her authority under the Property POA.
It is advisable for you to designate one or more successor agents to act on your behalf in case the primary agent is unavailable, unable or unwilling to act on your behalf if it becomes necessary. The primary consideration should be that the individuals appointed are people in whom you have a great deal of trust and can rely upon to act according to your interests and values. Your Property POA should also state the powers, duties, limitations, immunities and other terms applicable to your agent.
After your Property POA is signed, witnessed and notarized, you should considering giving a copy of the form to your agent. You should advise your family of your selection of an agent to act on your behalf if it becomes necessary.
While Illinois statute provides a form for the Property POA, specific powers can and should be added and subtracted as is appropriate for an individual’s situation. This should be done carefully in consultation with an estate planning attorney as POA’s are strictly construed and because it is generally desirable to retain “statutory power” status.
Often times a “gifting” power is inserted in the Property POA to facilitate estate tax planning or qualification for Medicaid payment of nursing home costs.
Beware that a Property POA is a “license to steal” and can be extremely dangerous if your agent uses the power to enrich himself. Also, an agent is under no legal duty to act as agent and some financial institutions are reluctant to honor Property POAs (especially ones older than 5 years).