For many people, avoiding probate is a top goal in estate planning.
Why?
Because it’s awful. If your estate has to go through probate after your death, it can result in significant delays before your beneficiaries can access things like your bank accounts, real estate, or investment accounts. We’re talking anywhere from months to years.
One of the most effective ways to avoid probate is by creating a revocable living trust. Assets that are moved into a trust while you’re still living do not have to go through probate.
But what happens if someone becomes incapacitated before they can set up such a trust? Can their agent under a power of attorney (POA) step in and create one on their behalf?
Yes…under the right circumstances.
Making Sure Your Power of Attorney Has the Necessary (Ahem) Powers
You may know that a durable power of attorney allows a trusted individual (known as an “agent” or “attorney-in-fact”) to handle financial and legal matters on someone else’s behalf. If the person who granted the POA becomes incapacitated, the agent can still act. In fact, that’s often kind of the point.
However, that authority only goes as far as the document allows.
To put it as directly as possible, if you include language in your POA document that explicitly authorizes your agent to create or modify a trust, then they should be able to take that step even if you become incapacitated.
As you might imagine, this can be especially important if someone wanted to skip probate but never got around to completing their estate plan when they were still able to do so. Once they become incapacitated, it’s too late for them to personally sign a will or a trust document. The only way for their wishes to be met is if someone else can legally do this for them.
Crafting a POA Document That Grants the Power to Create a Trust
Texas law does not automatically assume that the power to create a trust is included in a financial power of attorney. As mentioned above, it has to be clearly stated in the document itself. Yet another reason not to use a generic POA form you find online, because it is unlikely to incorporate this language.
Namely, you want your power of attorney to include “hot powers.” These are specific actions your agent may take that are more significant (and can be riskier in the wrong hands!). Examples include creating or modifying a trust, changing beneficiaries, or gifting assets.
If you’re concerned about avoiding probate and making things easier for your loved ones, don’t wait. We help individuals and families create customized estate plans that account for the unexpected, and we can ensure your power of attorney document includes any powers your agent might need.
Want to make sure your POA includes the right powers? Whether you’re reviewing your POA or exploring trust options, we’ll walk with you every step of the way. Contact us today to schedule a consultation.