Real Estate Attorneys Beware: Do Not Revoke Prior Powers of Attorney
In a real estate transaction in Illinois, it is common practice now for buyers and sellers of residential real estate to name their attorney as power of attorney for property, to execute the real estate transaction on their behalf. This allows for the buyers and/or sellers to be absent from the closing. Since real estate closings are long, drawn-out affairs there is obvious upside to such an arrangement. And with the current booming real estate market such arrangements are occurring with more and more frequency. But when executing the Illinois Statutory Short Form Power of Attorney, there are some important pitfalls to avoid. A real estate attorney should be aware of the pitfalls before having the clients execute the power of attorney.
Illinois Statutory Short Form Power of Attorney for Property
The Illinois legislature created a statutory power of attorney form to be used in Illinois. The idea was that the form would add some uniformity to powers of attorney and make them more accessible to the layperson. The power of attorney for property itself grants financial authority to the named fiduciary (agent) so that the fiduciary can act on the principal’s behalf in transactions. The power of attorney is signed in front of witnesses and is notarized. The financial powers granted to the fiduciary can be broad or limited in scope depending on the needs of the transaction. The power of attorney can also be limited in time, with a date set to expire. The power of attorney can also be immediate or “springing,” meaning that it is not effective until some event occurs – usually upon incapacity of the principal.
Crafting a Power of Attorney for a Real Estate Transaction
If you are creating a power of attorney for a real estate transaction, then it is necessary to alter the Illinois statutory short form power of attorney. First and foremost, every attorney should remove the line that states “this power of attorney revokes all prior powers of attorney.” This statement is dangerous because many people have estate plans with springing powers of attorney. Revoking those powers of attorney will leave the client open to guardianship proceedings upon their incapacity. It may also prevent them from partaking in Medicaid planning, transferring assets to a trust, estate tax planning, and gifting.
It may also be necessary to limit the scope of financial authority, depending on the approval of the title company and mortgage lender. Limiting the scope of authority may reduce loss your client will experience if the power of attorney falls into the hands of a nefarious actor.
Additionally, many title companies like to see language expressly stating that the agent has authority to take any action to sell (or purchase) the home, including executing closing documents. This makes it crystal clear that the attorney has authority as an agent to complete the real estate transaction.
Limitations of a Power of Attorney for a Real Estate Transaction
Some actions may not be desirable to undertake with a power of attorney. For instance, it is imperative to have the seller sign the closing transfer documents (deed, bill of sale, affidavit of title) themselves prior to closing rather than having the agent do it. This is easy enough, as they can be executed contemporaneously to the power of attorney.
It is also important to note that a power of attorney for property only grants financial authority to the principal. While not usually addressed in the context of a real estate transaction, many clients often desire a power of attorney for healthcare to make healthcare decisions for another. This can be accomplished separately with the Illinois statutory short form power of attorney for healthcare.
Contact the Libertyville Real Estate and Estate Planning Lawyers at JTLG, LLC Today
If you are participating in a real estate transaction in Libertyville, Gurnee, or the surrounding communities, then it is important to speak with an experienced Illinois real estate lawyer such as those at Johnston Tomei Lenczycki & Goldberg LLC. Our knowledge of both real estate law and estate planning law will ensure that your power of attorney is correct and will not be detrimental to any prior estate planning you have put in place. And if you are looking to update your estate planning we can assist with that to ensure that your assets transfer to your loved ones upon your passing with minimal tax consequence and litigation potential. Call us today for a no charge initial consultation for real estate and estate planning at 847-549-0600.
Phone Number: (847) 549-0600
Fax Number: (847) 589-2263
350 N. Milwaukee Ave., Ste. 202
Libertyville, IL 60048
223 N. IL. Rt. 21, Ste. 14
Gurnee, Illinois 60031
2100 Manchester Road, Suite 920
Wheaton, IL 60187