A Power of Attorney is a legal document where you (the “Principal”) give authority to make financial decisions to someone you trust (the “Agent”). The Power of Attorney is often referred to as the POA.
Anyone who is over eighteen (18) years of age in New York can sign a Power of Attorney if they understand the nature of what they are signing and have legal capacity.
The Power of Attorney is the cheapest and most effective way to appoint someone to manage your financial affairs if you become unable to do so. If you do not have a Power of Attorney, your family may need to go to Court and ask a judge to appoint a guardian for you. This applies even if you are married because spouses do not have a right to access accounts owned by the other spouse individually and in their name alone.
Anyone who is over eighteen (18) years of age and that you trust implicitly to make responsible decisions that will consistently be in your best interest. Most often this is someone in your family. Lawyers, accountants and other professionals can also serve in this capacity if no one in your family is available to handle the responsibility.
The Power of Attorney takes effect in New York when it is signed by the Principal and the Agent. The requirement that the Agent signs is relatively new to the law and was designed to minimize the financial exploitation these documents were causing among the elderly population. Often we will have the Agent sign the document much later so that it is not in effect until the document needs to be used.
Generally the Power of Attorney has to be honored in New York, but not in any other state. The document may be honored in another state, but it is best practice to contact an attorney in your new state to determine whether the document will be honored.
The biggest disadvantage is not having a Power of Attorney! You should be careful with the person you select as Agent and how much authority you give to that person. There are mechanisms in the law that let you appoint someone to monitor the Agent and give your family the right to ask the Agent how they are managing your funds which helps to ease many people’s fears.