Can you use a Power of Attorney to take the place of your will? I have spoken with quite a few people over the years who confuse the uses and purposes of estate planning documents.
Can you use a nail instead of a screw? Different tools for different purposes.
Powers of Attorney (POA) are some of the most commonly used estate planning documents, and they are also some of the most misunderstood estate planning documents, says nwi.com in a recent article “Estate Planning: Do Powers of Attorney lapse?”
A POA is a document that authorizes another person to act on behalf of the person making or signing the document. The person named in a POA is also referred to as the Attorney-in-Fact. They are the appointed agent to manage assets for you during your lifetime. The authority granted to this agent is usually spelled out in the document itself. Some POAs grant a wide range of authority, while others are limited to a specific action. An estate planning attorney can create a POA that suits a person’s particular needs, such as going to settlement on the sale of your home. I used to work across the street from Andrews Air Force Base and had many clients ask me to do this when they were transferred. In that context, limitations are far better than a generic document that may not be accepted because it is too broad.
Durable Powers of Attorney don’t usually exist for a set period of time. There are also limited or special POAs that have a date or a time frame, and at the end of that time frame or upon that date, they terminate.
A POA is not a substitute for a will because it does not assign any property to anyone at your death, and it ceases to give authority after you die. The “Durable” in power of attorney refers to it being usable if you are disabled, not to the continuation of powers after death. The only power that can survive after the death of the maker is the authority to dispose of the maker’s remains, and that varies by state.
The agent in a Power of Attorney serves because the principal has chosen them, and if that changes, they are removed from their responsibilities, as long as the principal is competent.
Estate planning attorneys are concerned less with the date of the POA than they are with the simple fact that banks and other financial institutions are reluctant to accept POAs that were created many years ago. We often use a Maryland Statutory Power of Attorney, a great improvement of Maryland Law since 2010, as it allows your agent to ask for attorney fees and court costs if someone fails to honor it.
In that case, usually, an affidavit affirming that the document is still valid and the attorney-in-fact has the authority to act under it is enough.
However, it is recommended that when you have your estate plan reviewed every three or four years, you also have your estate planning attorney update the Power of Attorney. This way there is less of a chance that a bank or other institution will balk at the document. The same goes for your health care proxy, also known as a Health Care Power of Attorney.
As for power of attorney instead of a will, it should always be the power of attorney and will.
Reference: nwi.com (November 3, 2019) “Estate Planning: Do Powers of Attorney lapse?”