In the past week, we have talked about the power of attorney as a component of your estate plan, including what to look for in choosing your agent and his or her legal duties. Today, we will discuss the kinds of powers and responsibilities you can delegate to your agent using your power of attorney.
The beauty of a POA is that you can craft it to transfer whatever powers you choose. For example, you could execute a POA just for one transaction such as to have the agent act for you at a real estate closing or manage one asset.
Automatic powers
In general, if the principal does not explicitly limit delegated powers, Colorado law automatically presumes that certain powers are granted, unless the principal specifically opts out of any of them. These general powers include those most people exercise like supporting the principal and his or her family; dealing with public benefits, government agencies and taxes; managing bank and retirement accounts; signing documents; dealing with real estate, stocks and personal property; buying personal property and contracting for services; standing in for the principal in lawsuits; manage business interests; and more.
Powers the principal must specifically grant
Colorado law says that the agent can only legally exercise certain listed powers if the principal expressly grants them. These powers, which the law requires a specific opt-in from the principal to use, have the potential for significant financial consequences for the principal and his or her family as well as for how much wealth heirs and beneficiaries will receive after the principal’s death.
For these reasons, anyone creating a Colorado power of attorney should carefully review these optional powers — sometimes called “hot powers” — with an experienced estate planning attorney to understand exactly what ramifications they might bring if granted.
These include:
- Create, manage or terminate a living trust
- Designate or amend a beneficiary designation
- Delegate POA powers
- Designate or modify survivorship rights
- Waive beneficiary rights in a joint and survivor annuity, including retirement plan survivor benefits
- Exercise fiduciary powers of the principal if the principal can delegate them
- Nominate or remove a fiduciary or participate in choosing or changing a fiduciary
- Direct a fiduciary’s exercise of its power, including directing investment
- Release property or an appointment power
- Exercise authority as a “partner, member, or manager of a partnership, limited liability company, or other entity” if the principal can delegate the authority and the principal does not solely own the entity
- And others
The sophisticated nature of some of these powers may motivate a principal to consider a professional POA with the specific knowledge needed to make smart decisions. An agent who was not appointed in his or her professional capacity and who faces the exercise of sophisticated POA powers should seek professional counsel such as from an attorney or investment advisor.
Finally, it is worth mentioning that a 2016 Colorado law created the option that the principal may choose to specifically allow or disallow in a POA whether the agent can access or use the principal’s “virtual assets” like emails and social-media accounts.