A Power of Attorney is a legal document where you name a person to step into your shoes when you are unable to make decisions for yourself. A Power of attorney may be immediate or having springing powers. The difference is that if a power of attorney is immediate then it can be used by the agent (the person you designate) the moment you sign the document. A power of attorney with springing powers generally requires obtaining certifications from two physicians that you are incapacitated or incompetent and you are unable to manage your affairs.
There are drawbacks and pitfalls to each scenario and you must balance the risk and reward. If an agent can use a power of attorney immediately then oftentimes there is a concern that they will attempt to defraud their principal, which is you. However, an immediate power of attorney could be used by a spouse if their loved one is out of the country on business and they need to access an account in their name alone or contract for home repairs, which require both spouses’ signatures.
A power of attorney with springing powers could lead to other difficulties if time is of the essence and your agent has to get two doctors to agree that you are incapacitated. What if the doctors haven’t seen you in years and you are now in the hospital? How is your agent going to obtain those required certifications in order to pay your bills or call the utility company to suspend service for a time period?
A comprehensive property power of attorney should include some provisions to assist with advance planning for Medicaid or Veteran’s Benefits eligibility. If you do not have a revocable living trust with Medicaid triggers, and are relying solely on a power of attorney, then the power of attorney should perhaps allow your agent to make gifts or transfer assets out of your name for asset protection purposes. It should include the ability of your agent to do estate planning to perhaps set up an Irrevocable Living Trust.
Your power of attorney should address a variety of issues that may arise, such as tax preparation, real estate transactions, lawsuits and any other function that you would normally perform, but are unable to do so.
In Maryland, you must also be aware of the fact that you will most likely need two different powers of attorney for property. The first is a Maryland Statutory Financial Power of Attorney that was enacted by the Maryland Legislature in 2010. The power of attorney covers a variety of financial matters and is on the bank’s radar for what they will be looking for from an agent. This power of attorney may supersede any existing power of attorney you may have in your possession prior to 2010, especially if it is not witnessed by two people.
The other power of attorney is what we call the supplemental property power of attorney and will be necessary when dealing with a company outside of Maryland or for any of the needs I mentioned before.
Making sure you have all of the documents you need in place before an emergency will give you and your loved ones peace of mind and make life easier during a difficult time.
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