Summary: A complete estate plan includes financial and healthcare powers of attorney in the vast majority of situations. However, one should be aware that financial powers of attorney are not without their limitations and difficulties. One way to escape some of these challenges is by using a revocable living trust, as financial institutions are, in many cases, less likely to refuse to recognize a successor trustee acting under the authority of a trust agreement that an agent acting under a power of attorney.

Power of attorney is an important part of almost every estate plan. A financial power of attorney is a document where you, as the document’s creator (known as the “principal”), name someone else (your “agent”) to make certain decisions about your assets on your behalf. This document can give your agent these powers from the moment you sign it or only after you have become mentally incapacitated and cannot make those decisions for yourself.

While these powers of attorney are vital pieces to the estate planning puzzle, they are not, however, without their challenges, as the New York Times recently reported. In an Aug. 22 article entitled “Power of Attorney Is Not Always a Solution”, the Times explained that, with a power of attorney, “when it fails, the consequences can be nothing short of disastrous.”

One of the problems with powers of attorney is that many financial institutions refuse to recognize them, meaning that, even when presented with a properly executed power of attorney document, the institution still refuses to give the agent access to, and control over, the principal’s accounts. When this happens, the agent often has limited choices to break through this impasse except filing a legal challenge, which can be expensive and time consuming.

One estate planning technique that may help avoid some of these dilemmas and serve you better is using a revocable living trust. With a living trust, you put your assets into the trust while you are alive and competent. From a legal perspective, your trust owns those assets, so transitioning their control and management from you to the person you’ve designated requires only documentation that the person seeking that power is the properly appointed successor trustee and proof that they are entitled to begin acting on behalf of the trust (such as a death certificate in the event of your passing or doctors’ notes stating that you’ve become mentally incapacitated.)

As the article correctly points out, using a trust reduces the risk of having a problem with the bank. One attorney explained it to the Times this way, “Banks are more comfortable with this … What you’re doing is getting a jump on the legal system designed to handle these things.” In order for this plan to work, though, you must make sure you fill out the necessary paperwork to place the asset into the trust. Each financial institution may have its own transfer documents it may require to complete the transaction.

This article written and published by:
Legacy Assurance Plan
8039 Cooper Creek Blvd
University Park, Florida 34201
844.306.5272 (Phone)
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