Durable Power of Attorney
Both your Revocable Trust and Power of Attorney serve an integral part of a comprehensive estate plan. Each document serves virtually the same function of allowing another person to handle your financial affairs, but a Revocable Trust operates only to manage Trust assets while a Power of Attorney handles all non-Trust assets. Both documents work together with the goal of preventing assets from falling through the cracks upon death or incapacity.
The trustee you name in your Revocable Trust handles management of your Trust assets if you become incapacitated, and distribution of those assets at your death. You are able to control who receives those assets and when they are distributed. A Power of Attorney, on the other hand, is a document that gives your “agent” or “attorney-in-fact,” authority to manage the vital aspects of life such as accessing your mail or dealing with the IRS. It also allows your agent to deposit your Social Security checks, or manage your retirement account. Your agent can also add property to your Trust if it would be in your best interest to do so. The powers granted to the agent may be as broad or narrow as you wish.
If a Power of Attorney is made “durable,” it remains in effect after your incapacity and generally remains effective until your death, your revocation of the power, or termination of the power by its terms. In order to revoke, cancel, or end a power of attorney before it expires, you must sign and notarize a Revocation of Power of Attorney and give a copy of the revocation to the agent and any person who might have or will possibly deal with the agent.
A Durable Power of Attorney may be effective immediately upon its execution or only when the principal becomes incapacitated (a “springing power”). A Springing Power of Attorney becomes effective when the person or persons designated in the power of attorney execute a written declaration under penalty of perjury that the specified event or contingency has occurred, and any person may act in reliance on the written declaration without liability to the principal or to any other person.
Facing up to the fact that you might need someone to manage your personal financial affairs at some point can be daunting but it is worth the time and effort now to have peace of mind later.