Powers of Attorney
A Power of Attorney is a legal document delegating authority from one person to another. In the document, the creator of the Power of Attorney (the “Principal”) grants another individual (the “Agent”) the right to act on their behalf as if the Principal was present and acting themselves. What authority is granted depends on the specific language of the Power of Attorney.
A person creating a Power of Attorney may make the Agent’s authority to act very broad or may limit it to only include specific acts.
A Power of Attorney designates an individual to make financial decisions, while a Health Care Surrogate designates an individual to make medical decisions. These financial decisions may include the following:
- Buying and selling investments
- Accessing safe deposit boxes
- Selling or conveying real property
- Executing contracts, agreements, leases, mortgages, or notes
- Managing business interests
- Paying legal debts and obligations
- Initiating, continuing or defending legal claims
- Executing and filing tax returns
Having a Power of Attorney in place is important to avoid the delay and expense of having a judge appoint a guardian to serve on your behalf in the event you cannot act make these financial decisions for yourself. In situations where financial decisions must be made swiftly the guardianship process can often cause tremendous hardship. A Power of Attorney also allows you the ability to choose who should serve as your Agent, rather than leaving this up to a judge’s determination.
What is a “general power of attorney”?
A “general power of attorney” typically gives the Agent very broad powers to perform any legal act on behalf of the principal. A specific list of the types of activities the agent is authorized to perform must be included in the document.
What is a “limited power of attorney”?
A “limited power of attorney” gives the Agent authority to conduct a specific act. For example, a person might use a limited power of attorney to sell a home in another state by delegating authority to another person to handle the transaction locally. Such a power could be “limited” to selling the home or to other specified acts.
Who may serve as an agent?
Any competent person 18 years of age or older may serve as an agent. Agents should be chosen for reliability and trustworthiness. Certain financial institutions with trust powers also may serve as agents.
What are the responsibilities of an agent?
While the power of attorney gives the agent authority to act on behalf of the principal, an agent is not required to serve. An agent may have a moral or other obligation to take on the responsibilities associated with the power of attorney, but the power of attorney does not create an obligation to assume the duties. However, once an agent takes on a responsibility, there is a duty to act prudently.
Is there a certain code of conduct for agents?
Yes. Agents must meet certain standards of care when performing their duties. An agent is looked upon as a “fiduciary” under the law. A fiduciary relationship is one of trust. If the agent violates this trust, the law may punish the agent both civilly (by ordering the payment of restitution and punishment money) and criminally (probation or jail).
When is a power of attorney effective?
The power of attorney is effective as soon as the principal signs it. However, a durable power of attorney executed before Oct. 1, 2011, that is contingent on the incapacity of the principal (sometimes called a “springing” power) remains valid but is not effective until the principal’s incapacity has been certified by a physician. Springing powers of attorney may not have been created after Sept. 30, 2011.
What is the difference between a “trustee” and an “agent”?
Like a power of attorney, a trust may authorize an individual (the “trustee”) to act for the maker of the trust during the maker’s lifetime. Like an agent, the trustee may manage the financial affairs of the maker of the trust. A trustee has power only over an asset that is owned by the trust. In contrast, an agent may have authority over all of the principal’s non-trust assets. Another important distinction is that a trustee may continue acting for the maker of the trust after the maker of the trust dies. In contrast, the power of attorney expires upon the death of the principal. Whether a trust or an agent is the most appropriate tool for a specific situation is a question that should be addressed to an attorney.