What is a Financial Power of Attorney and how can it avoid a Conservatorship in California? Matthew and Elizabeth Talbot discuss.
In the state of California, you need a power of attorney in order for someone else to sign documents on your behalf or act as an agent to represent you. We generally use the phrase “Power of Attorney” to refer to the management of financial assets, and “Advance Health Care Directive” for healthcare. For our purposes here, we are speaking only about a Power of Attorney as it refers to management of finances.
The primary reason a resident of California needs to have a power of attorney is so that someone can manage their assets should a catastrophe occur, or should they become mentally incapacitated at some point in the future. I have worked with clients in the San Francisco Bay Area who are caring for family with alzheimer’s or dementia, and also those who have family members with serious head injuries. In those situations, a Power of Attorney is crucial because it appoints someone who can act on that individual’s behalf.
Without a Power of Attorney, family members must obtain a conservatorship, which is a costly and often lengthy legal process. With over 5.3 million Americans currently diagnosed with Alzheimer’s, chances of this disease or another that inhibits mental capacity are not as low as one would think. We highly recommend all residents in the San Francisco Bay Area have a power of attorney. We always include this as part of the Estate Planning package. In some cases, it can be more important than a Revocable Trust.
Other reasons someone might need a Power of Attorney:
One is travelling or temporarily residing out of the country and need someone to locally to manage California assets.
To manage a lawsuit on his or her behalf
1. A Power of Attorney is a legal document that allows an individual (who is called the principal) to designate someone to represent them (called the attorney-in-fact or agent).
2. A Power of Attorney grants power to the agent to handle a specific task, such as signing a sale document, or handle on-going tasks. In a properly drafted document, the powers granted to the agent are clearly spelled out in the Power of Attorney. Examples include:
Probate Code Section 4264 specifies that an attorney-in-fact (agent) can form a trust on your behalf, but cannot change or execute a will.
No. It is illegal for an agent to gift themselves from your accounts. An agent who takes property from a principal over the age of 65 can also be convicted of Financial Elder Abuse.
Yes, as long as you are mentally competent. For example, if you sign a Durable Power of Attorney, it will remain in effect even if you lose mental capacity. If you make a gift to an agent after you become incompetent, the agent can be held legally liable and can face prosecution for financial elder abuse. You can make a gift to your agent. However, if your Power of Attorney is a “Durable Power of Attorney,” i.e. one that remains in effect even if you become incompetent, a gift to your agent after you become incompetent may be restricted by law. This is because, if you are incompetent, it would be the agent who is deciding to make the gift of your property to himself/ herself. You may wish to speak to an Estate Planning lawyer before giving any gifts.
When an agent or attorney-in-fact is a trustworthy, organized, and responsible person, a Power of Attorney is a safe option. An experienced Estate Planning attorney can also refer you to a professional fiduciary, or someone who can professionally manage your assets and sensitive transactions. Professional fiduciaries also have the added benefit of being represented by attorneys, making them an extra safe option.
Yes. Multiple agents can be appointed who can work together to act on your behalf. Alternate agents can also be appointed, should something happen to the primary agent.
The Power of Attorney goes into effect on a date decided by you. This could be immediately, 6 months in the future, or only if you lose the mental capacity to make your own financial decisions.
Yes, either you or your agent can perform the tasks/duties given by the Power of Attorney.
A power of attorney can expire at a date chosen by you, or upon a task being completed by your agent. If you sign a “Durable Power of Attorney,” it will last until you either die or cancel it.
We strongly recommend consulting with an attorney and having the advice and guidance of a lawyer who specializes in Estate Planning. If you have questions, concerns, or need an emergency Power of Attorney, call our office at 925-322-1795.
A Power of Attorney has the ability to grant an agent access to your bank accounts, property, insurance, and all of your other personal financial accounts. As such, it is very important that you trust your agent completely, and that you understand the scope of the powers you are giving to them. For instance, if you need them to be able to make bank deposits on your behalf, but not withdraw money, make sure that your Power of Attorney clearly states this. Also, ask yourself if there are any alternatives to a Power of Attorney. Ask an experienced Estate Planning lawyer for advice if you have any questions. It is important to have a full and complete understanding of what a Power of Attorney is before signing anything.
Consult an Elder Law Attorney to draft and review your document. A Durable Power of Attorney must also be notarized. This service is often one that can be provided by your Estate Planning attorney.
Even if your Power of Attorney Documents meets all legal requirements, it is possible that a financial institution will not accept it. Banks and other financial institutions do this to protect themselves. If a Power of Attorney is not accepted, a Conservatorship may be necessary.
Under California law, a power of attorney is ineffective when the grantor (or principal) dies or becomes “incapacitated.” The law defines incapacitated as being unable to grant such powers due to mental illness or physical injury. However, if the principal specifies in their Power of Attorney that the document continue even after they become incapacitated, then the Power of Attorney will last until they die. This is called a “Durable Power of Attorney” or “power of attorney with durable provisions.”
The Power of Attorney can either be cancelled by the principal, or those who suspect a problem with a Power of Attorney can file a petition with the Probate Court requesting Court review of the agent’s actions. The court may then decide to pursue further investigations.
As a law firm that specializes in trusts, estates and conservatorships, we have had more than a few cases in which a problem exists with a power of attorney. In one case, for example, two Power of Attorneys were executed, one of which occurred after the person may have already been mentally incapacitated. Because of the ambiguous nature of the second document, a conservatorship needed to be established to manage the person’s finances.
Yes, a Power of Attorney can be changed or Cancelled. Consult with an Attorney to determine the best way to do so for your specific situation.
An agent can file a petition with the Probate Court (located in Martinez for Contra Costa County, and Berkeley for Alameda County) asking for confirmation of the Power of Attorney. The probate court can also order institutions to honor the authority of the agents.
*Disclaimer: All information contained on this website is for informational purposes only and shall not be construed as legal advice. Talbot Law Group, P.C. recommends that you consult an attorney who specializes in Estate Planning to execute all legal documents.
Estate Planning and Probate Firm Talbot Law Group assists clients with their estate plans across California, including Contra Costa County, Alameda County, San Francisco County, Napa County, Marin County, Sonoma County, Santa Clara County, San Mateo County, and Los Angeles County.
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