For Colorado residents planning their estates, there may be concerns about empowering a representative to make certain legal or financial decisions as needed under certain conditions. While a power of attorney is used to designate such a representative, the type of power of attorney selected affects the types and timing of decisions to be made by that individual.
Certain responsibilities are also conferred by the type of designation selected that must be specifically listed in the document; these are known as “hot powers.” These powers can involve financial actions or changes to important estate planning documents such as trusts. The ability of a representative to exercise powers or rights in a partnership must be listed to be effective. Rights to exercise certain fiduciary powers and to disclaim or release property or waive a principal’s rights as a beneficiary are all possible hot powers.
Certain hot powers can only be performed by a designated relative, including a parent, sibling, spouse, child or grandchild. This is true even if the powers are listed as being assigned to a non-qualified individual. These hot powers include being able to make a gift, adjust rights of survivorship and beneficiary designations, and make adjustments to trusts. A power of attorney must be notarized to become effective. This document does not eliminate one’s own right to make decisions as such action can only be accomplished by conservatorship or guardianship action.
Because hot powers must be designated and because each individual case presents unique circumstances, an individual considering the appointment of a power of attorney could benefit from discussing his or her situation with an estate planning lawyer. While the above information supplies a general overview of hot powers as they pertain to powers of attorney, it is not meant to be construed as legal advice.
Source: Colorado Bar Association, “Financial Powers of Attorney”, October 10, 2014