If you are thinking of an immediate power of attorney, take your time and make the decision carefully.
When you create a power of attorney, the authority granted in that document can be immediately effective, or alternatively can be activated only by documented proof that you are incapable of acting.
Everything in life has its advantages and disadvantages. The immediate power of attorney is great because it is very easy to use. It can be not so great because it is equally easy to misuse.
However, that requires some very careful thought before making the decision, according to the Glen Rose Reporter in “Should you add hot powers to your power of attorney?”
The “hot” powers are well-named since they give a financial power of attorney considerable power. It is a lot of leeway for an agent to be given during one’s lifetime. This is because it allows the agent to create, amend, revoke or terminate a trust during the principal’s lifetime.
The agent may also be given the power to make gifts, to themselves or others> They can also include other special powers, such as the powers to create or change rights of survivorship, create or change a beneficiary designation and to authorize another person to exercise the authority granted under the power of attorney.
These extraordinary powers can be very helpful for long term care planning if someone is now or will soon be in need of nursing home care.
The gifts the agent can make are further limited to being consistent with the principal’s objectives if the agent knows what those objectives are. However, if the agent does not know what those objectives are, he or she must still make sure the gift is aligned with the principal’s best interest, based on the value and nature of the principal’s property, foreseeable obligation and the need for maintenance.
The power of attorney in all cases needs to know what their responsibilities are, and if they are given “hot” powers, they need to be informed what those specific powers are. If the agent is someone other than a spouse or descendant, that agent may not make gifts to themselves. A spouse or descendant, however, could make gifts to themselves.
It boils done to the degree of confidence you have in who you are empowering in your power of attorney. The person does not need to be a financial genius. They can hire advisors. However, there is no replacement for trustworthiness.
Reference: Glen Rose Reporter (Jan. 3, 2019) “Should you add hot powers to your power of attorney?”
