Great estate planning makes sure your wishes are carried out after you pass away.
But, is it possible to make sure your wishes are always carried out while you are alive?
You may need help from someone you trust to manage some complex financial matters.
Or, you may become incapacitated or too ill to make financial or medical decisions.
A power of attorney (POA) can help in these situations.
But there are different types that are used for different reasons.
How do you know which ones to you - and when?
What is a Power of Attorney in California
A power of attorney is a legal document that grants the holder (called the agent) legal authority to act on behalf of another person (called the principal). You may grant power of attorney to an agent giving them just a few specific powers, or substantial powers.
A Financial POA allows someone to make financial decisions for you and a Medical POA allows someone to make medical decisions for you when you cannot.
What POAs are Valid in California
POAs can either take effect immediately upon signing the document or they can become effective in the future upon some specific event like becoming incapacitated. These are called immediate or springing POAs.
You can revoke a POA at any time you wish. You granted the power with the POA, and you can terminate it.
It is important to know that all POAs are only valid while you are alive. Upon your death, any POAs you granted are no longer effective. At that time, your estate planning documents should make sure your wishes are carried out.
When it comes to POAs, every state is different.
California recognizes 5 types of POAs.
A general POA allows your agent to act on your behalf on financial matters. But it only lasts until you become incapacitated, at which time the authority ends.
A durable POA grants the same power as the general POA but continues even if you become incapacitated. This is a major difference and allows your agent to continue managing your finances, even if you become incapacitated for any reason. Cal. Prob. Code §4124.
A springing POA is similar to the general POA but only becomes effective after the occurrence of a certain event. For example, you might want to manage your own affairs until you become incapacitated at which time the Springing POA would grant the power to your agent. Cal. Prob. Code §4129.
A limited POA is just like it sounds. You can grant limited specific powers to someone for a limited time or until a specific occurrence. For example, you might give a limited POA to the car dealership to transfer your car title. Or you might be travelling and grant the power for your agent to sell your house for the next 90 days. That power would expire when the house sells or at the end of 90 days, whichever comes first.
A medical POA is a very common but very important document. You give a trusted person the right to make healthcare decisions for you when you cannot do so.
Some Situations Require More than a POA
Working with the IRS
While the IRS will recognize a valid POA, they have their own Form 2848 - Power of Attorney and Declaration of Representative which is used by attorneys, accountants, enrolled agents, and certain other tax professionals allowed to practice before the IRS. Most tax attorneys customarily file Form 2848 on behalf of their clients even if they have a valid POA on file. For more information, see IRS Publication 947.
Working with the SSA
The SSA does not recognize financial POAs. To designate someone to manage your Social Security benefits (including SSI payments), you must appoint a “representative payee.” You can appoint a representative payee in advance. If you do not appoint a representative payee and the need for one arises, the SSA may appoint one for you.
A potential representative payee must complete form SSA-11 and, usually, an in-person application at their local Social Security office. Representative payees are expected to fulfill a range
of required duties and be actively involved in the beneficiary’s life. They may occasionally be asked to submit a report to the SSA accounting for how they used the beneficiary’s benefits.
Working with the VA
Veterans who are not physically present or who want help with their claim may authorize another person to represent them when pursuing a claim for compensation or special monthly pension benefits. The veteran does not have to be incapacitated.
However, the VA states that an “individual with POA under State law is not authorized, based on the State appointment, to engage in VA representation.” The VA allows only certain types of representatives, and they must apply for accreditation using different forms. Individual representatives must use VA Form 21-22a. Accredited representatives must use VA Form 21-22.
More information about the VA and POA is available in this document
Working with Financial Institutions
Banks and other financial institutions sometimes refuse to honor valid financial POAs. These refusals seem to happen in California, New York, Florida, and other states. California Courts even have the advice on what to do when banks don’t recognize POAs (see # 18 in the link).
In some cases, they may simply be exercising caution to protect themselves from authorizing an illegal transaction. In other cases, the institution may wrongfully insist on using its own POA form for accounts under their management.
Do I Need an Attorney for a Power of Attorney?
Not at all.
You can get them on the internet for free.
Should you use an attorney to draft your POAs?
Absolutely. More than that, you should use a qualified California attorney.
POAs are powerful and important documents that transfer your powers to other persons.
Remember, the story above about the bank refusing to honor a valid POA? A qualified California attorney knows how to correctly draft the POA and what to do should any bank or other financial institutions refuse to honor them.
Also, a California attorney will know which type of POA to use and when.
San Diego Legacy Law is a qualified California law firm specializing in estate and trusts.
We are familiar with all valid types of California POAs and are glad to answer any of your questions.
Call Us Today - and learn how POAs can make sure your wishes are carried out even if the unexpected happens.