A general power of attorney is a useful document by which an individual (the “principal”) can grant to another person (the “holder,” “attorney-in-fact,” or simply “agent”) the right to conduct functions, typically of a financial nature, on his or her behalf. In California, the most commonly used general power of attorney is a Uniform Statutory Form Power of Attorney, the provisions for which are set forth in California Probate Code Section 4401, although other written variations may be used. There are several misconceptions we encounter that are inherent in the creation of general powers of attorney, two of which we will discuss below.
This misconception often arises because of confusion surrounding different estate planning roles, such as the “successor trustee” of your trust, the “executor” of your will, or your “agent” under your power of attorney. In fact, when you die, the power of attorney you have granted terminates, meaning that your agent no longer has authority thereunder to manage your financial affairs. However, this is the point where your successor trustee and executor will typically pick up the slack and begin managing and distributing the assets in your trust and estate. Therefore, we recommend you develop a complete estate plan, including the creation of a declaration of trust, will, power of attorney, and advance health care directive in order to cover matters arising during your life and afterwards.
By initialing paragraph (H) on the Statutory Form, you provide your agent with the power to handle “estate, trust, and other beneficiary transactions.” However, we have found that when working with financial institutions, for any financial accounts that may be owned by the trustee of a trust, this language is often deemed insufficient.
To remedy this problem, we recommend you provide in your declaration of trust language to the effect that you, the trustor (creator of your trust), specifically authorize the granting of a power of attorney to conduct trustee functions. We further recommend that your power of attorney contain an additional specific instruction granting your agent the power and authority to conduct on your behalf all your functions as trustee of your trust.
A power of attorney is a key element in a comprehensive estate plan. We are here to help you understand and develop such an estate plan to benefit your loved ones.
The above statements are generalizations only and are not to be taken as legal advice for the reader’s particular situation.