Entries tagged with “power of attorney”.


OK, I’m not talking about an actual spare tire – I’m talking about a Power of Attorney.  Yes, a Power of Attorney is just like a spare tire; I’ll let that analogy sink in for a few moments.  The term “Power of Attorney” is not foreign to most people, but how many of them really understand what it means?

 A Power of Attorney (POA) is a legal document but it has very little to do with an attorney.  Although your attorney prepares the document, your attorney is usually not named in the document and has no power under the document.  Instead, your POA allows you to name a family member or close family friend as your attorney-in-fact (i.e. your Agent) to handle your financial affairs for you, pay your bills, manage your investments, etc.  Many people consider a POA as something intended to be used if you become incapacitated, but most POAs are effective immediately and can be used if you are simply unavailable (for example, when one spouse is traveling out of the country and the other spouse needs to sign loan documents for a bank).  The important thing to know is that if you don’t have a POA in place and you become incapacitated, then your family will likely need to have a legal guardian appointed for you by the court; this  can be an expensive and time-consuming process.

 My clients often struggle with the decision of who to name as the Agent in the POA.  My advice is to name someone that you trust implicitly with everything; someone you would gladly hand your credit cards and checkbook to without any concern.  Typically a 19 year old child is not the first choice unless your chief goals are to 1) hit all the best concerts  within a 2 hour drive, 2) maintain a high profile in the local club scene, and 3) have an endless supply of Red Bull.  Most often people pick someone in their family or a close family friend who has sound business judgment and good money management skills.  Also, it is important to pick someone who is likely to get along with most everyone in your family; this will hopefully avoid potential conflicts in the future.

 A POA does not allow your Agent to do everything for you.  For example, your Agent can’t make or change your Will, can’t get a divorce for you, and can’t act in your place as an officer in a company; however, most other legal or financial matters that require your signature are fair game.  The POA may also allow your Agent to make gifts to your family from your property and you should make sure you review that option in the document if that is a concern for you one way or the other.

 In North Carolina if you sign a POA and later become incapacitated the POA must be recorded in the local Register of Deeds; most financial institutions will require that the document be recorded before honoring it in any event.  A financial institution may have other requirements and make the Agent jump through a few other hoops before accepting the POA, but ultimately once they are satisfied that everything is in order they will cooperate with Agent and allow the POA to work as intended.

 I am sure you get the point now about driving around without a spare tire.  A POA is something that you may never need, but if you do, you will be glad you have it.

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Land and inherited by a group of misfits?  POA to the rescue!

Probably one of the worst things that can happen in a decedent’s estate is for a group of beneficiaries who don’t get along to inherit real estate.  Under North Carolina law, beneficiaries  under a Will are generally vested with title to the property as of the date of the decedent’s death, which means the beneficiaries, and not the executor, have the authority concerning sale of the property.   Although Wills often include a provision addressing the executor’s authority to sell real estate, the exact language of the Will is usually insufficient to allow the executor to handle the sale of real estate without involvement of the beneficiaries.  That is, if the real estate is not left to the executor with directions to sell the property as part of the estate administration, then the beneficiaries will inherit the property as tenants-in-common as of date of death.

This means that if the beneficiaries desire to sell the property they must all agree on the terms of the sale and they must all be involved in the execution of the documents.  Imagine the prospect of involving numerous owners in a sale negotiation and then getting them to agree.  Have you ever tried to pick a place to go out to eat based on input from a group of people?  Any interested buyer is going to lose patience pretty quickly unless the decision-making can be delegated.

A power of attorney (POA) is the solution.  The beneficiaries can appoint one individual (known as the attorney-in-fact) with full authority to negotiate the sale of the property and execute all documents including the deed.  This delegation eliminates any required involvement of the beneficiaries — the actual owners of the property.  The attorney-in-fact may be the Executor of the decedent’s estate or one of the beneficiaries or some other party; the key is to find someone who can make a good decision about a sale of the property and who is trusted by all the beneficiaries.

It is important to make sure that all of the beneficiaries as well as the beneficiaries’ spouses sign the POA; this is required under NC law to convey good title to the property.  Also the POA will need to be duly recorded in the county where the real estate is located.  The POA document should ensure that the attorney-in-fact is authorized not only to execute sale documents but also to receive proceeds of the sale on behalf of the beneficiaries.  This will ensure  that the attorney-in-fact can direct the closing attorney to dispose of the proceeds in the most efficient manner.

So what happens if the beneficiaries can’t agree on what to do and are unwilling to appoint an attorney-in-fact?  A mess…a big mess happens.  As tenants-in-common, each beneficiary will effectively have a veto right over any decision concerning the property.  More importantly, any one beneficiary can initiate legal proceedings to force a sale or a severance of the property, in which case the value of the property will likely be reduced for all concerned.  In this case, the POA may still be an option if cooler heads can prevail.

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