When your life has reached the stage where you may need to help a loved one or aging parent handle their finances or make medical decisions for them, a great tool to reach for is a power of attorney (“POA”).
As we’ll explain more fully below, a POA can be very useful, but it does have its limits. One major limitation to be aware of is that a Durable POA for finances cannot be used to manage assets in a trust.
The person executing the POA is the “principal,” and the person with the power to act for him/her is the “agent.”
In estate planning, it is common to execute a:
Each state has its own rules and names for medical, as opposed to financial, POAs.
In some states a Durable POA can be used to make either medical decisions or financial decisions for a person who is incapacitated. In Florida, POA’s are typically not used for medical decisions, instead Health Care Surrogate Designations are used.
The word “durable” in this context refers to the fact that the POA will not terminate if the person (i.e., the principal) becomes incapacitated. A Durable POA must have specific language allowing the power to survive the incapacity of the principal. In practice, most POAs are durable POAs because the very intent is for the POA to be used after the principal is incapacitated.
A power of attorney can be either limited or unlimited. This means that the principal decides exactly how much authority he wants his/her agent to have. If the POA is unlimited, then the agent has full authority to do whatever is reasonably necessary to carry out the mission of the POA. For example, if a Durable POA for finances is unlimited, then the agent can make any and all financial decisions for the principal. If it is limited, however, then the language of the POA will describe exactly what the agent has the authority to do.
A revocable living trust is a legal document that is created by a “grantor” to manage his/her assets during his/her lifetime and then to pass them on to his/her heirs at his death. For example, your parents might create a revocable living trust that they manage as trustees during their lifetime. (They would be the grantors, trustees, and beneficiaries of the trust in this case.) At their death, any money or property held in the trust will not have to go through probate to be distributed to their heirs.
If your parents have a living trust and they become incapacitated, you may think that you can simply use a Durable POA for finances to pay their bills, etc.
Because the trustee of the trust (i.e., your parents) technically owns all the assets in the trust. Plus, the trustee has a legal duty to administer the assets of the trust. As a fiduciary of the beneficiaries of the trust (also your parents) he or she cannot give someone else (i.e., you) blanket authority to administer the trust assets by executing a durable power of attorney.
So, if you cannot act under your Durable POA to help your incapacitated parents pay their bills because they have a trust, what happens if the trustee of a trust becomes incapacitated and can no longer manage the trust assets?
Generally, in this type of situation, where it is shown that the trustee is incapacitated, what will happen is that the successor trustee named in the trust will take over.
Your estate plan is too important to leave things to chance. Take the time to hire an experienced estate and probate attorney to assist you.
Our team here at SJF Law Group works hard to ensure that your wishes will be followed, and your loved ones taken care of when you are gone. Our estate planning lawyers expertly guide individuals and families through the complex probate process and capably handle all aspects of the creation, administration, and settlement of estates and trusts. When you work with our Florida estate planning attorneys at SJF Law Group, you get more than just an estate plan: you get peace of mind.
As trusted probate and estate planning lawyers, we serve individuals and families in the vibrant communities of Plantation, Fort Lauderdale, Boca Raton, West Palm Beach, and Miami, FL. We are also pleased to offer the options of both in-person and virtual appointments throughout Florida to make our services accessible no matter where you are located.
If you want to discuss your specific situations with one of our estate planning lawyers, do not hesitate to reach out to our law firm at 954-231-3430. You can also fill out our contact form.
