The power of attorney is a powerful document; likely the most powerful legal document that you’ll ever sign. However, it is not an all powerful magic wand. The power of attorney has limits.
Not a Magic Wand
The power of attorney is not a magic wand because it’s not always honored, especially if it’s older or the signature looks scribbled. It is common place for a power of attorney to be refused because of its age as institutions are afraid of honoring a revoked, forged, or fraudulent document. Thus, it is extremely important to keep your estate plan up to date.
It is also common for a financial institution to refuse to honor a power of attorney because it’s not their form. Such institutions don’t want to analyze the legality and validity of each power of attorney for each client. They want you to use their forms.
Belt and Suspenders
Disability provisions in a revocable living trust and a power of attorney work well together. Trusts and trustees are never refused. However, a trustee may only manage assets that are titled into the name of the trust. If an asset is not funded, the agent under the power of attorney must manage that asset.
It is prudent to have a “funding power of attorney” so that your agent has the authority to transfer your assets into your trust on your behalf. However, there are some assets such as retirement accounts and cars (in some states), that cannot be transferred into the trust, so the power of attorney agent must act.
It is common for the trustee of your trust and your agent under your power of attorney to be the same person. Be sure to name successor trustees and agents in the event that your named trusted helper is unable or unwilling to serve.
If you have questions about powers of attorney or disability planning with a revocable living trust, consult with a qualified estate planning attorney.