Does Your Power of Attorney Contain “Hot Powers?”

by Dan A. Baron, Baron Law LLC

Who will manage your finances and investments if you become sick or incapacitated? Who will pick what doctor to treat you or if a risky but potentially lifesaving procedure should be performed? Do you have someone to manage all of your assets in the event of incapacity?

These are the sorts of questions and issues typically handled by your power of attorney. As they suggest, these are critically important decisions that shouldn’t be taken lightly. Fundamentally, however, these issues can only be handled by your power of attorney if they possess the specific authority.  With recent changes to Ohio law, these authorities are referred to as “hot powers,” and each should be carefully considered when creating a comprehensive estate plan.

I. Financial Power of Attorney

To understand what hot powers are, you must understand what a power of attorney is. A financial power of attorney, also known as a durable power of attorney, is a legal document a person can use to appoint someone to act on his or her behalf for financially related decisions. POAs come in many forms, but their primary purpose is to grant authority to one or more responsible parties to handle the financial and/or health decisions of a person in the event of illness or other incapacity. Life and its associated obligations and burdens tend to continue regardless of one’s physical or mental health. POAs offer protection that ensures affairs are handled and medical wishes are followed even if you lack capacity in mind or body.

Powers of attorney are important to have because surviving spouses or family members will face difficulty and frustration gaining access to things like bank accounts and property that is in your name alone. This can be especially damaging within the context of business or professional relations in which the “gears of industry” must keep moving. Alas, if an individual trusted to handle the business if something happens doesn’t possess the authority to do so, significant or even fatal business consequences may result. The same goes for medical decisions when treatment decisions must be made right there and then. Hesitation may mean permanent damage or death to you and if someone doesn’t have express authority to make those decisions, things get confusing, messy and take a lot longer.

II. What are “Hot Powers?”

So, where do hot powers fit in all this? Ohio adopted the Uniform Power of Attorney Act, or UPOAA, which was focused on preventing financial elder abuse. Now, POAs must include a statutory language designed to help prevent agents from abusing their power. Unfortunately, although the act was designed to prevent abuse, it has put banks in a position to make it incredibly difficult for your agent to act in a time of need. This is why unclaimed funds in Ohio are more than $3.9 billion for 2022.  General POA’s that have been drafted prior to 2012 are considered obsolete. Nonetheless, the nine most important general and hot powers that every POA should include are:

  • Making a gift
  • Business banking powers
  • Managing qualified retirement accounts
  • Creating or changing rights of survivorship
  • Creating or altering beneficiary designations
  • Creating, amending, revoking or terminating a trust
  • Delegating any authority granted by the power of attorney
  • Disclaiming or releasing property or a power of appointment
  • Annuity management, and ability to create a Medicaid-compliant annuity.

Hot powers grant extraordinary powers to your agent, and often these powers can have the effect of altering your estate plan. As such, these powers must be expressly granted per statutory guidelines before they are used by your agent. Hot powers are often used to continue a plan of gifting, and sheltering money or property from the costs of a nursing home. Specified gifting hot powers can gift anywhere from a limited dollar amount or unlimited, depending on the scope of the “hot powers” granted and the goals of your estate plan. Further, this power can also be limited to a class of people, such as spouses or children.

III. Should You Give Hot Powers?

Like every question in estate planning, whether you should give hot powers is circumstantial. The main consideration is who will be given the powers and under what terms. As stated above, hot powers are extraordinary powers meaning they should be trusted with the right person in a well-crafted estate plan. Regardless of whether you give these powers or not, it is probably wise to have your estate planning attorney look at your powers of attorney if it has been more than five years. The law and your personal circumstances change quite often.

For a free consultation and review of your power of attorney, contact Baron Law at 216-573-3723 or dan@baronlawcleveland.com.

Dan A. Baron, Baron Law LLC

Sponsored By

Baron Law LLC
Crowne Centre, Suite #600
5005 Rockside Road
Independence, Ohio 44131
216-573-3723
www.baronlawcleveland.com

Opinions and claims expressed above are those of the author and do not necessarily reflect those of ScripType Publishing.