Not all powers of attorney are created equal. Durable financial powers of attorney grant your agent the authority to act for you when you are unable. These agency agreements can vary in terms of scope and complexity. Some financial powers of attorney are very simple. They permit your agent to manage your money and property. The agent can pay bills, make investments and even sell your property if necessary.
Powers of attorney can also grant extraordinary powers to your agent. These powers can have the effect of altering your estate plan. They are commonly known as “Hot Powers” and need to be expressly granted to your agent before they are used. The most popular of them is the power to gift your money or property. This power is often used to continue a plan of gifting or to shelter money or property from costs of your care in a nursing home. The power to gift can be limited to a dollar amount or unlimited in scope. The power to gift can also be limited to a class of people, such as spouse or children.
In 2015 the Pennsylvania Legislature decided that these Hot Powers had to be expressly set forth in your power of attorney. The Legislature was addressing cases of financial abuse involving these powers, along with the associated lack of knowledge people had about their extraordinary power to alter estate plans. If your power of attorney is signed after January 1, 2015, it must now expressly grant the eight “Hot Powers.” They include; the gifting power, the power to create certain trusts – including an irrevocable asset protection trust, the power to change rights of survivorships on bank accounts or other assets, and change a beneficiary designation including those in life insurance policies and retirement accounts.
Many of these powers are practical to have as we age and are concerned about sheltering our assets from long term care costs. However, great consideration needs to be given as to who will be given the powers and under what terms. If you have not recently updated your power of attorney, now may be a good time to visit your elder law attorney for a review.