Estate Plan Basics: Powers of Attorney

Powers of Attorney provide assurance for families across all areas of life.

Last week we discussed what an estate plan includes. This week, we’re going to look at what the specific parts of an estate plan. Today we are going to look at powers of attorney (“POAs”).

For clarity and to repeat the disclaimer on this site, this article does not constitute legal advice and should be treated as purely academic. Your situation is unique to you and you should consult with an attorney to make sure any action you take is correct.

As mentioned last week, Virginia recognizes a variety of POAs. POAs fall under two umbrellas – general POAs and limited and they are either durable or springing. General POAs are defined by generous grants of authority to an agent. Limited POAs cover specific subject matters which Virginia law also recognizes. You can grant a General POA while making specific carve outs to other people in Limited POAs and you can also broaden a General POA to include the carve outs.

POAs are freely revocable, must be made while of sound mind, and can be limited to triggering events or effective when created. Virginia uses the Uniform Power of Attorney Act. Virginia assumes a POA is durable unless otherwise stated. In the absence of a POA, a Virginia court may grant a guardian or conservator over you and your affairs via petition by an interested party. Any person granted POA bears an obligation to act in your best interests and is usually entitled to reimbursement of reasonable costs in acting as your POA. Someone designated POA has the right to turn down the designation through a court process.

First, let’s clear up some terms. The principal is the person who grants authority found in a POA. The agent is the person designated by the principal to act on their behalf. Durable means that a POA persists regardless of whether the principal is incapacitated or not. A springing POA must “spring forth” from a triggering event that incapacitates the principal.

General POAs. General POAs entitle an agent to utilize courts, contracts, and third parties to carry out the business of the principal. General agents are said to have the “authority to do all the acts that a principal could do.” There are some exceptions, though and we’ll cover those shortly.

In general, an agent under a general POA may:

·       Demand, receive, or litigate for money or other things of value on behalf of the principal and then invest or disburse those things for the purposes they’re intended for;

·       Contract on terms agreeable to the agent in order to satisfy or dispose of contracts held by the principal;

·       Act as authorized signatory and file any records or instruments the agent believes will accomplish the purpose of a transaction;

·       Enter or participate in alternative dispute resolution to dispose of a matter on behalf of the principal;

·       Seek assistance of a court or other governmental agency to carry out an act authorized in the power of attorney;

·       Engage, pay, and discharge professional service providers;

·       Prepare, execute, and file a record or report meant to safeguard the principal’s interests;

·       Communicate with any representative or employee of a government or governmental agency;

·       Access communications on behalf of the principal; and

·       Do any lawful act with respect to the principal and their property within the POA.

Virginia limits general POA powers. A general POA cannot cover the following areas unless specifically stated in the POA:

·       Creating, amending, revoking, or terminating an inter vivos (living) trust;

·       Making a gift

·       Creating or changing rights of survivorship;

·       Creating or changing a beneficiary designation;

·       Delegation of authority granted under the power of attorney;

·       Waiver of the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan;

·       Exercising fiduciary powers that the principal has authority to delegate; or

·       Having authority over the content of an electronic communication of the principal under §64.2-123.

Definitionally, the specifics of what falls into limited POAs are above. Also note that if you qualify or restrict the general POA authorities, you’ve, by default, created a limited POA..

As you can see, general POAs are comprehensive. Virginia deals with two other very important aspects of life elsewhere. Specifically, medical decision-making and guardianship of children are under different statutes and do not typically fall within general POA boundaries. Let’s look at those.

Medical POAs. First, some terms. Medical POAs, also known as advanced directives, in Virginia substitute the word “declarant” for principal. To be valid, the declarant must sign off on the directive in front of witnesses (two) and state their wishes concerning treatment, donation, and appointment with specificity. Advanced directives are a type of springing POA; they come into effect when you are incapacitated and incapable of making decisions. Since this POA controls medical decisions after a triggering event, Virginia requires additional qualifications to ensure that the individual is protected from bad-faith actors.

In Virginia the powers of an advanced medical directive can be assigned by a court where either the directive is silent on a type of treatment or no directive is found. By order of preference, the law looks towards (i) a guardian for the patient; (ii) the patient’s spouse (Provided they’re not in the process of getting divorced); (iii) an adult child of the patient; (iv) a parent of the patient; (v) an adult sibling of the patient; (vi) any other blood relation; or (vii) anyone who has shown special care or relationship with the patient who is intimately familiar with the patient’s beliefs and preferences, a patient care committee, or at least two physicians who are not associated with the treating physician, facility, or patient. Note that those in (vii) cannot make decisions concerning taking a patient off life-prolonging care.

Virginia law prohibits advanced medical directives from specifying care for abortion, psychosurgery (psychological surgical treatment), or voluntary sterilization.

Guardianship of children. Virginia allows the appointment of a standby guardian under the same conditions as a springing power of attorney. This simply means that something has to happen in order to make the appointment effective. In the case of standby guardians, you have to have a writing that provides the name and address of the effected children, the triggering event, and the name and address of the standby guardian. When you experience the triggering event, the standby guardian must petition the court to take temporary custody of your child after you experience the triggering event.

You may also designate a guardian for your children via will. This would be referred to as a testamentary guardian. If your triggering event above is your passing, then it is customary to include a guardian designation via will. If you elect to place your estate in a trust, a separate standby guardianship can also ensure that your children are accounted for. In any event, a will, regardless of estate plan, can help ensure that anything that happens after you draft an initial document can be taken care of and managed appropriately, so the additional will option is available.

Virginia courts, at all levels of review, evaluate all guardianship appointments in accordance with the principal’s wishes as well as under the family law standard – best interest of the child. To that end, there is judicial scrutiny applied to your agents. A Virginia court may appoint a guardian ad litem to take into consideration the child’s wishes and the court may also wish to hear from the child directly. Know that the best interest of the child standard will always be a premier consideration for courts in Virginia when making decisions concerning minors.

In the absence of a specific designation Virginia law provides that, in the absence of a standby guardian, a surviving parent (provided they have not abandoned the family), a stepparent, adult sibling, adult relative (By blood, marriage, or adoption), or closely trusted family friend may petition the court for guardianship of children where the parents are both gone. The court, in such cases, shall conduct hearings to ensure that the child will be taken care of and that any assigned guardian is in the best interest of the child.

Powers of attorney are a key part of any estate plan. They give you, the principal, an extraordinary amount of control as to who manages your affairs, what powers they hold, and when they hold them. From an agent’s perspective, having your wishes spelled out and knowing exactly what lanes they occupy provide a great deal of clarity solid grounds to defend themselves against allegations of abuse of the power of attorney.

If you are looking to build out your estate plan, reach out today for a consultation and let’s start the process of tailoring a plan to what your needs and concerns rea.