What Is A Hot Power

In 2016 the Connecticut legislature adopted a new law known as the Connecticut
Uniform Power of Attorney Act that made significant changes to the power of attorney. The goal was both to improve the old Statutory Power of Attorney Act and give warning to people about powers that can be used for good and for bad. For example, if a family member is given the power to give away your assets, that could be used wisely, or could be used to take away your assets to your detriment to benefit the person who is power of attorney. These powers to change where your assets go during lifetime, or after your death, are known to attorneys as the “hot
powers.” In order to give people pause to think before giving such powers, the law requires that the person making the power of attorney put their initials next to each specific authority.

The first hot power is to create, amend or revoke and fund trusts. Many people make
trusts to pass on property after death to their children without going through probate. But what if one of those children or their spouse ended up in a nursing home. If they were on Medicaid (Title 19), having money go to them might just be giving it to the state. So the legislature included the power to modify trusts in ways that the agent (the person who is power of attorney) has reason to believe would benefit you or the persons you would wish to benefit.

The law also allows direct gifts to named persons or classes of persons, such as children. When discussing with clients who to name as a power of attorney, the question should be, “will your power of attorney always have your best interest at heart and not take advantage of you and other family members?”

Along with making gifts the ability to change rights of survivorship or to change
beneficiaries can drastically alter estate planning. Here is an example. Let’s say a parent has named her three children as beneficiaries on her IRA, bank accounts, or life insurance. But years later one of the children has a stroke and ends up on Medicaid. If that child gets money upon the parent’s death, it will have to be spent down to reimburse the state. But by changing the beneficiary designation, the money in the account can go to the healthy children. Or it could go into a supplemental needs trust for the disabled child that would help pay for items that Medicaid
does not pay for. That could be the difference that keeps that disabled child out of a nursing home. 

One interesting power in the 2016 law gives power over digital assets, such as Facebook accounts or other digital assets. This was not an issue before the age of digital communication, but it could be a big issue in today’s world.

This is not a full explanation of the “hot powers,” but it points out that the person you choose to act as your power of attorney should have good judgement, should have your best interests at heart, and should handle your assets wisely. Parents will sometimes say, “That child is not good with money. One child may be very needy for money, and favor himself or herself over the others. That’s not a person to give power to handle your money.

It is possible to give the power to two people who must act jointly. This can provide a
double check if one is not completely reliable. But it can also result in stalemate if the two just do not get along. And if they do get along, why make them act jointly? The law allows you to name two or more people “severally” which means any one of them can act on your behalf. This is the preferable way if they all do get along, because if one of them becomes unable to sign for you, the others will not have to prove to the bank why one of the others can no longer sign as power of attorney.

It is often said that a power of attorney could be the most important document to have. The reason is that family circumstances and health can change and if you are no longer able to act, someone you trust can act for you. So get thorough advice, and evaluate your family situation, and do a power of attorney under the Connecticut Uniform Power of Attorney Act so that a trusted person can handle your financial affairs if you cannot.