When Does a Power of Attorney Go into Effect?
There is a common misconception that a power of attorney, a document that gives a designated agent the legal authority to manage financial and other affairs on behalf of a principal, only becomes effective when the principal becomes incapacitated. Typically, however, this is not the case. While the primary purpose of a power of attorney is usually to allow a family member to seamlessly assume your financial affairs should you become incapacitated, in order to accomplish this goal it is usually advisable for the document to be drafted to take effect immediately.
The power of attorney documents used in estate planning are typically durable, meaning they remain in effect even after the principal becomes incapacitated. They also usually take effect immediately upon execution. In fact, under Florida law, all powers of attorney created after 2011 must be effective immediately in order to be valid. However, even before that attorneys generally discouraged powers of attorney that only became effective upon incapacity because most banks and other institutions would refuse to honor them without proof that the principal was incapacitated. This largely defeated their usefulness as an incapacity planning tool.
The fact that POAs become effective immediately only highlights the need to choose an agent who is both capable and trustworthy. This is because such a document usually grants your agent broad powers to act on your behalf:
- The power to access financial accounts
- The power to sell property
- The power to enter contracts
- The power to vote stock or exercise corporate rights
- The power to make gifts
- The power to take out loans and mortgages
Consulting with an experienced Florida estate planning attorney ensures that you fully understand the effect and implications of your POA and that the document accurately reflects your intentions.