One of the most useful tools in the Estate Planning arsenal is the Power of Attorney. not an Estate Planning tool per se, but its one of the documents that seem to best be done at the time the Will, Living Trust, and Health Care Power of Appointments are done.
A POA is basically a document which allows the agent to act on the principal's behalf as if they were the principal. In other words, the person being named in the document steps into the shoes of the person "granting" the power to do whatever that person could do. The POAs we use are "durable" in that the effectiveness survives the principal's subsequent disability or incapacity.
We frequently suggest POAs between spouses, though I have seen them between siblings of advanced ages.
The Wills Prof (I have to shorten it since I seem to be linking to him so often) blawged an article on the pitfalls of the POA (The Perilous World of POA Agents, 96 Ill. B.J. 398 (2008)). In it, the author, Helen W. Gunnarsson, explains how even well meaning agents can run afoul of statutory requirements and their fiduciary duties.
The problems are often obvious: agents do not know in advance the scope of what may be required of them; they don't know that their duties may extend for years and even decades; and that other family members may scrutinize their every move.
As much as I like the POA, I tend to suggest them only in dire circumstances. For one, the principal needs to have the capacity to understand the principal/agent relationship and the powers that they will be giving up. Spouses tend to understand this best. I make sure to explain to the principal that the agent will be able to do everything (absent health care decisions) that they could do.
