A Power of Attorney is a very common estate planning tool, that can easily be customized to fit each client’s needs. When a Power of Attorney is created, the usual purpose is to handle legal, financial or medical needs for someone else. For instance, a power of attorney can be used to manage bank accounts and pay bills. Or, if one is incapacitated, it can allow an agent to manage their medical treatment. An agent’s actions are governed by the authority given in the power of attorney document, so what an agent can do is determined by the instructions you give. If making gifts on your behalf is a power you want your agent to have, then you can indicate your wishes when the power of attorney is drafted. Deciding whether agents make gifts under your power of attorney is up to you.
How much power do you give your agent?
When you create and execute a power of attorney, you are known as the “principal”. The person to whom you give the power to act on your behalf, is known as the “agent”. How how much power you give your agent is determined solely by the type of power of attorney you execute and the language you use in that legal document. A power of attorney can be either limited or general.
Limited Power of Attorney
If you create a limited power of attorney, you need to be very detailed in describing the authority you want to give your agent. Only the powers specifically mentioned in a limited power of attorney can actually be exercised by your agent. So, if you execute a limited power of attorney, and you want him or her to be able to make gifts on your behalf, then you must specifically convey that authority. Otherwise, he or she will not be able to do so.
General Power of Attorney
On the other hand, when you execute a general power of attorney, your agent will be allowed to do nearly anything you, as the principal, would be able to do. A general power of attorney is a very powerful legal document, which conveys significant power. When executing a general power of attorney, you should assume that the agent will have authority over all of your assets. In that situation, the agent will have the ability to make gifts of your assets, in your name. Most states, however, prohibit an agent from making gifts to himself or herself, while acting as an agent, unless that authority is specifically mentioned in the document.
What are an agent’s responsibilities to the principal?
Being an agent is a serious role that should not be taken lightly. An agent is expected to act in good faith, and avoid any conflicts that would prevent him or her from acting in the principal’s best interests. It is considered improper to override the desires of the principal in favor of the agent’s own preferences.
Also, an agent must keep his or her own money and property separate from the property of the principal. Whenever an agent conducts financial transactions on behalf of the principal, only the principal’s funds can be used for the principal’s benefit. The agent is also required to keep accurate and complete records of all transactions.
If you have questions regarding a power of attorney, or any other estate planning needs in Reno, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.