A general durable power of attorney is an important estate planning and elder law planning tool. A power of attorney allows the attorney-in-fact, also referred to as the agent, to manage the legal and financial affairs of the principal (the person making the power of attorney designation). The agent’s authority comes from state law and from the power of attorney document that describes the agent’s duties and powers. Typically the agent would be able to pay the principal’s bills, take care of banking, manage investments, pay insurance premiums, make claims for benefits under health insurance or other programs, collect money owed to the principal, and apply for government or other benefits. The principal can customize the power of attorney document to meet his or her specific needs.
One power that can prove particularly helpful for estate planning and elder law planning is the agent’s ability to create a trust for the benefit of the principal. However, this power is not automatically included in a general durable power of attorney. If the principal wants the agent to have the power to create a trust, the power must be expressly stated in the power of attorney document.
A recent appellate court case from Kentucky illustrates this point. In Dishman v. Dougherty, a case involving a very complex set of facts, the wife as the agent under a power of attorney created a trust for her husband. In that case, the court held that
“in order for an attorney-in-fact to create a trust pursuant to a POA (power of attorney), this authority must be expressly provided for in the instrument if it contains a specific provision related to trusts.”
The court found that the instrument in question only permitted the agent to “[c]onvey any real or personal property to the Trustee of any trust agreement between me and said Trustee and entered into either before or after the date of this instrument[.]” That language, which is the usual language included in many power of attorney documents, only allows the agent to convey property into a trust but does not permit the agent to create a new trust. In Dishman v. Dougherty the court held that the trust created by the wife was void from inception.
If you are creating a power of attorney you should consider whether to give your agent the power to create trusts and what other specific powers, if any, should be included in the document.
Getting Legal Help
The power of attorney is an important planning tool. If you need help preparing a power of attorney or if you are the agent under the power of attorney and need guidance in your role as the agent contact experienced Estate Planning and Probate Attorney, Elga A Goodman. Contact us today at 973-841-5111.
Posted in: Estate Planning, Long Term Care Planning, New York Estate Planning, Power of Attorney, Trusts, Uncategorized