Beware of Pre-Printed Legal Forms
When faced with a difficult situation, using “pre-printed” or “canned” financial power of attorney (i.e., downloadable forms, documents borrowed from someone else, or those prepared by non-lawyers), will often result in more legal problems than one cares to have. The reason is because most pre-printed financial powers of attorney fail to include provisions required to handle a variety of assets some of which may include a business, or a tax qualified account like an IRA. Unfortunately, many people believe that a power of attorney is a document that does not require legal expertise when drafting. This conclusion could not be farther from the trust.
A financial power of attorney is a legal document that establishes an agency relationship between two or more persons. The individual authorizing another to act on his behalf is the “principal” and the person acting on behalf of the principal is the “agent” or the “attorney-in-fact.” Capacity to execute a general power of attorney is necessary, and requires that the principal is capable of understanding, in a reasonable manner, the nature and effect of his act. Golleher v. Horton, 148 Ariz. 537, at 540, 715 P2d. 1225, at 1228 (1986).
In estate planning, financial powers of attorney are used to authorize another person to act on one’s behalf during a period of incapacity or when the principal is unable to manage his financial affairs. This type of power of attorney is called a “springing durable power of attorney.” By contrast, a general power of attorney grants the authority to the agent to act immediately for the principal and is often effective upon execution of the document.
Dangers of Pre-Printed Legal Documents
Today, it is easy to obtain pre-printed powers of attorney. The danger, however, is that in pre-printed financial powers of attorney three major provisions are often excluded. These provisions are as follows:
(1) The power for the Agent to handle individual retirement account (IRA), Roth IRA, §403(b) annuity or account, §457 plan, Federal Thrift Savings Plan (TSP), Civil Service Retirement System (CSRS), Federal Employee Retirement System (FERS);
(2) The power for an Agent to make gifts, grants, or other transfers without consideration, of cash or other property, including the power to forgive indebtedness and consent to gift splitting under Internal Revenue Code §2513 or successor sections; and
(3) The power for an Agent, (who may also be the Principal’s spouse) to amend a grantor revocable living trust.
So, what kind of estate planning documents do you want? Pre-Printed forms or documents copied from someone else? Make an appointment with your estate planning attorneys so you can put into place a plan that is unique to your needs and goals.
IMPORTANT: Neither this blog article nor any information on this website shall be construed as the offering or rendering of any legal advice, and does not establish an attorney-client relationship between the reader and Mesch Clark Rothschild, (“MCR”) or any attorney at MCR. You should consult with an attorney if you have a specific question regarding your legal issues.