Mental incapacity and dementia are becoming more common in New York and around the country as lifespans grow longer and treatments for deadly diseases like cancer become more effective. This means that even an individual who has full control of their mental faculties should consider drafting a power of attorney that designates a trusted person to tend to their financial affairs should they become incapacitated. It is important to do this before cognitive problems develop because powers of attorney are only valid when they are executed by individuals of sound mental capacity.
Durable or springing
In New York, powers of attorney must be signed, legible and notarized. The person who signs the power of attorney is called the principal, and the person who is given authority to act on their behalf is called the agent. It is a good idea to also name a successor agent who can step in if the agent dies or becomes incapacitated themselves. There are two types of power of attorney. A durable power of attorney goes into effect as soon as it is signed, whereas a springing power of attorney only grants powers to the agent when a triggering event, such as incapacitation, occurs.
Powers of attorney are extremely useful estate planning tools, but they must be drafted carefully as the laws governing them are strict and they are often challenged in court. The New York State and Local Retirement System provides a form that meets the legal requirements, but individuals do not have to use it. When New York residents wish to grant their agents the authority to transfer assets or make gifts, they must attach a properly executed gift rider to their power of attorney. If they do not, their agent will not be allowed to transfer or gift more than $500 per year.
Assistance with estate planning matters
If you are concerned about the decisions that will be made on your behalf if you become ill or incapacitated, an attorney with estate planning experience could explain the benefits of drafting a power of attorney and health care proxy to name a trusted individual to act in your best interests. An attorney could also recommend that you revisit these documents from time to time to ensure that the person you named as your agent is still the individual you trust the most to make these decisions.