— Power of Attorney —
What is a Power of Attorney?
Powers of Attorney are governed by the law of agency, a branch of common law concerned with the delegation of power from one person, generally called the principal, to another, called an attorney-at-fact or agent.
When a person becomes incapacitated, a court may step in and appoint someone to represent and make legal decisions that the person would have to take. One of the ways to avoid government or court intervention, and the appointment of a stranger to act as your guardian, is to use a Power of Attorney. A Power of Attorney is a written document stating that one person gives to another the full power and authority to represent him or her. It must be signed by both the attorney and the principal, witnessed by two people and notarized.
What is a Durable Power of Attorney?
A durable power of attorney is a form of agency. The person who gives the power is the principal, and the person who receives the power is the attorney-in-fact or agent. Durable in this context means that the agent’s power will survive the principal’s incapacity or disability. As a result, a Durable Power of Attorney can be used as an alternative to guardianship in some states under certain circumstances, provided the principal executed the document before losing capacity. There are two types of Durable Power of Attorney: Financial Durable Power of Attorney and Healthcare Power of Attorney. The difference between the two is the authority granted to the agent, as described below:
The Financial Durable Power of Attorney is also know as a General Durable Power of Attorney. The agent’s authority to act for the principal under a Financial Durable Power of Attorney is based on the powers that the principal gives to the agent. Whether broad, general powers or limited, the specific powers given to the agent are completely determined by the principal. Among other things, the principal may delegate to the agent in the Financial Durable Power of Attorney the authority to make deposits and withdrawals from his/her checking account, to file his/her tax returns, and to sell his/her home. However, there are a few powers that the principal may not delegate. For example, the agent cannot prepare a Will, vote, or seek a divorce on the principal’s behalf. If the agent has a financial interest in the subject matter of the power of attorney, the power is generally irrevocable. Most senior citizens who execute Durable Powers of Attorney are getting assistance with their day to day personal affairs and their agents do not have an ownership interest in the senior’s property which would preclude revocation. In addition, revocation can be by implication, in addition to, destruction of the document or express revocation by the principal.
A Healthcare Power of Attorney specifically grants authority to the agent to make decisions about and relating to medical treatment. For example, the agent make consent to treatment, refuse to consent to treatment, or withdraw consent to treatment. In addition to these decisions directly about medical treatment, the agent may make all arrangements at any hospital or nursing care facility, employ or discharge care personnel, request, receive, and review any information about the personal affairs or physical or mental health of the principal.
In preparing a Financial or Healthcare Durable Power of Attorney, the principal must sign the document in the presence of two qualified witnesses, and it must be notarized. As laws vary from state to state, it would be in your best interest to consult an Estate Planning attorney in your area if you want more information about Powers of Attorneys.
What options do I have in assigning Power of Attorney?
There are many ways to designate a decision-maker for you with a Power of Attorney document. You can assign a General Power of Attorney that covers all of your financial and personal decisions, or a Limited Power of Attorney that only covers decision-making in areas that you specify. You can make your Power of Attorney Durable, which means that it stays in effect if you become incompetent. Or, a Power of Attorney can be Springing, which means that it becomes effective only when you become incompetent. Another option is to delegate a Health Care Proxy or Durable Health Care Power of Attorney, a person designated to make health care decisions for you.
What does a financial attorney-in-fact (agent) do?
Many times, people will give an attorney-in-fact broad power over their finances. But you can give your attorney-in-fact as much or as little power as you wish. You may want to give your attorney-in-fact the authority to do some or all of the following:
- use your assets to pay your everyday expenses and those of your family
- buy, sell, maintain, pay taxes on and mortgage real estate and other property
- collect benefits from Social Security, Medicare, other government programs or civil or military service
- invest your money in stocks, bonds and mutual funds
- handle transactions with banks and other financial institutions
- buy and sell insurance policies and annuities for you
- file and pay your taxes
- operate your small business
- claim property you inherit or are otherwise entitled to
- hire someone to represent you in court, and
- manage your retirement accounts.
Whatever powers you give the attorney-in-fact, the attorney-in-fact must act in your best interests, keep accurate records, keep your property separate from his or hers and avoid conflicts of interest.