At some point in your life you may face the prospect of not being able to make your own decisions, or you may need someone to step in and make them for you. In these situations you can grant someone else power of attorney, or POA. A POA gives another person, called the attorney-in-fact or the agent, the right to make decisions for you. The agent can do whatever you authorize him or her to do within your estate plan, with certain exceptions.
A hot power of attorney is one that is specifically addressed by state law. If you want to pass along one of these identified powers, you must state so specifically in the power of attorney document. This is true even if you grant your attorney-in-fact general or universal powers of attorney. Unless you specifically grant these hot powers, your attorney-in-fact does not have the authority to make these decisions. What kind of powers qualify as hot powers differs between states, but they generally fall into certain categories.
- Giving gifts. Agents can’t take your property and give it away.
- Beneficiaries and rights of survivorship. Agents can’t change who is a beneficiary of, say, your life insurance policies, or create or change any rights of survivorship you have. They also cannot waive your rights to be a beneficiary of a retirement plan or joint annuity.
- Delegating power of attorney. Your agent cannot turn around and give someone else the powers you grant to her.
- Make fiduciary decisions that someone else granted the principal. If the principal is someone else’s fiduciary, the agent cannot make fiduciary decisions for the principal.