Cheri L. Elson and Allen G. Drescher, Retired
21 S. 2nd St. ● Ashland ● Oregon ● 97520

Powers of Attorney for Finances – the Scoop

Most people are familiar with Powers of Attorney and how they work at a basic level.  However, these documents can have very important consequences to your overall estate plan and should be thoughtfully drafted.

First, some important terminology to understand the different roles in a Power of Attorney.  The Principalis the person creating the Power of Attorney, giving someone else authority over their financial decisions.  The Agentis the person being given the authority.  Now we can discuss how Powers of Attorney work.

Powers of Attorney may be broad or narrow in scope. For instance, the Principal could give the Agent powers to manage all of the Principal’s assets or limited them to only address real property. Powers can also be limited by time, allowing the Agent to manage the Principal’s assets while the Principal is away. However the Principal wants to limit the Agent’s powers, is fine; the Principal need only clearly state those limits in the document.

It should be clear, however, that in a general Power of Attorney, the Agent’s powers only exist as long as the Principal has the legal capacity to exercise those powers themselves.  If something happens to the Principal and they are not able to manage their own finances (due to a coma, say), the Agent loses their ability to act on the Principal’s behalf. 

This does not work so well in the world of estate planning, where we are setting up documents specifically to allow others to help us if we are incapacitated.  Luckily, this problem is easily addressed by making the Power of Attorney “durable,” allowing the powers of the Agent to continue even when the Principal lacks capacity.  For a Power of Attorney to be “durable,” it must include specific language stating this intent.  Almost all of the Powers of Attorney I prepare for my clients are “durable.”

Another choice is whether to make the Power of Attorney effective immediately or “springing.”  A Power of Attorney that is effective immediately gives the Agent the powers in the document immediately upon the Principal signing it.  Even though the Principal is fully capable of managing their own finances, the Agent has full authority alongside the Principal.  Typically, when we are naming an Agent to manage our finances for us, we do not want them to have any power untilwe are incapacitated.  To effectuate that, I usually advise a “springing” Power of Attorney – one which only comes into effect upon the Principal’s incapacity.  In this situation, it is important to have a good clear definition of incapacity in the document itself in order to avoid court for the determination. 

A well-crafted Spring Durable Power of Attorney often works best to satisfy my clients’ desire to have someone named to manage their assets only if they are unable to manage them alone.  Working with an experience estate planning attorney will ensure that your documents are drafted in a way most beneficial to your situation.

Heirs, Beneficiaries, and Trustees – Part 2

In my last article, I defined “Heir”, “Beneficiary”, “Personal Representative”, and “Trustee.”  These terms can be confusing in the abstract – often, using them in examples helps clarify what each means and how it fits into the context of an estate plan.

First, the facts for our examples: When George Jetson died, he left behind a wife, Jane, a daughter, Judy, and a son, Elroy.  George also had a maid, Rosie, and a dog, Astro. The value of his estate on the date of his death was $400,000, triggering a probate under both California and Oregon laws.  The person appointed by the court to oversee and manage the probate is the Personal Representative.

In our first example, George dies intestate, that is, without leaving a document distributing his estate at his death.  Under the laws of intestacy in both Oregon and California, Jane would be first in line to be appointed Personal Representative, with Judy following if Jane could not, or did not want to act.  Because Elroy is under age 18, he does not qualify. George’s Heirs are his wife and children and they would receive his estate after the probate was complete. 

Let’s say, however, that before his death, George writes a Will, naming his dear friend, Mr. Spacely, as his Personal Representative. In both California and Oregon, a person or entity named in a Will takes preference for appointment over any other person or entity, and Mr. Spacely would be named Personal Representative, unless there was some reason that would disqualify him.  George’s Will leaves his entire estate to Rosie and Astro, making them his Beneficiaries.  Barring a successful contest to the Will, they would take the estate over George’s Heirs (Jane, Judy, and Elroy – although Jane may be able to still receive some as the surviving spouse, a subject for another time!).

In our first two examples, a probate is required, and Jane must seek court authority before taking many of the actions needed in administering an estate.  This adds both unnecessary time and expense to the administration of George’s estate. 

In the last example, George centers his estate plan around a living Trust. George names Jane as his Trustee and leaves the Trust Estate to Jane and the kids, as well as some provisions for Rosie (to thank her for her years of service), making them all Beneficiaries. As Trustee, Jane has the same basic duties as a Personal Representative; however, she does not require court authority in order to act. The Trust also provides for Jane (as Trustee) to manage Elroy’s share until he is 25 and (hopefully) ready to manage the money wisely on his own (something not easily accomplished in a Will without writing a Trust into the Will).

Hopefully, putting these terms in contexts of examples help keep them straight.  They have very specific meanings, rights, and duties – knowing the difference can go far in ensuring your plan is accurate and in sync with your needs and desires.

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