We often get questions about what to do when a person wants to give up their authority over their personal and financial life. If they do not already have a Revocable Living Trust that provides for a transfer of that authority, then the next best thing is a Power of Attorney (POA).
The person who is granted the POA is often referred to as the Agent, who has the power to make decisions about your affairs. However, the POA is revocable at any time.
The type of POA dictates which affairs you are granting power over. In this article, we discuss the most common types of Power of Attorney — General POA, Limited POA, and Medical Power of Attorney.
A General Power of Attorney allows the Agent to make a wide range of decisions. This is your best option if you want to maximize the person’s freedom in handling your assets and managing your care. For example, your agent could pay your bills, sell or rent out your real estate, make financial decisions, and more. However, it does NOT give the Agent the right to modify any trust or will unless the POA specifically grants that power. In addition, a General POA does NOT let your Agent make healthcare decisions for you. Those decision rights are covered by a Medical Power of Attorney, as discussed below.
A Limited Power of Attorney restricts the Agent’s power to certain assets. For example, the Internal Revenue Service (IRS) will not accept a General Power of Attorney. There is a special form for that – and even within that form, the power can be limited to just talking to the IRS or expanded to represent you with the IRS and even sign tax returns on your behalf. You can also create a POA for a specific action, such as handling the sale of a specific asset.
A Healthcare Power of Attorney is a document that authorizes legal permission for a person of your choosing to execute your healthcare directives. To put it simply, you allow another person to make your medical decisions for you.
The Power of Attorney is a very powerful and helpful tool and can be part of, but does not take the place, of a comprehensive Estate Plan.
Keep in mind that any POA becomes null and void when the person it represents passes away.
Note: Any changes to your estate plan must be drafted by your attorney.
About KROST’s Estate and Gift, Trust, and Probate Services
Our estate planning team assists with the transition of family wealth and estate succession. Our team of experts has over 80 years of combined experience working with family-owned and privately held companies, as well as high-net-worth individuals. Our primary goal is to assist individuals and their attorneys to effectively transfer wealth while minimizing unnecessary estate, gift, and generation-skipping taxes. In addition, we can coordinate all of your trust, probate, and estate planning needs to ensure a smooth transition while minimizing emotional, tax, and administrative burdens.
About the Experts
Douglas A. Venturelli, Esq.
Tax, Estate & Trust, Gift and Probate, Sports & Entertainment
Douglas A. Venturelli is a Principal at KROST. He has over 45 years of experience in tax, estate, and business services. His main focus is federal estate and gift taxes. Doug consults with clients in the entertainment, legal, real estate, and medical industries. » Full Bio
Richard Umanoff, CPA, MBA
Tax, Estate & Trust, Gift and Probate
Richard Umanoff is a Principal at KROST. Richard’s career spans over 45 years, with a concentration in taxation. His primary emphasis is estate and trust tax compliance, planning, estate administration, and probate court accounting. Richard currently serves in the role of trustee for numerous clients. » Full Bio
This information should not be construed as tax advice, nor should be taken as financial planning advice. Please consult your tax professional. These opinions are based on observations and research and are not intended to predict or depict performance of any investment. These views are as of the close of business on 2/22/2023 and are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities. Past performance does not guarantee future results.