Nearly everyone knows that they should have a will and an estate plan so that upon death their estates can be administered to their beneficiaries promptly and efficiently. However, many people fail to plan for lifetime disability. Strokes, injury, accidents, old age are examples of such disability. Who will legally handle your affairs (business, financial and personal) if you are unable to?
What is a Power of Attorney?
A power of attorney is a written legal document by which you appoint a person to act as your agent. An agent is one who has authorization to act for another person. The person who appoints the agent is the principal; the agent is also called the attorney-in-fact.
If the authority is to act for the principal in all matters, it is a general power of attorney. If the authority granted is limited to certain specified things, it is a special power of attorney. If the authority granted survives the disability of the principal it is a durable power of attorney.
Who May Be Appointed Under a Power of Attorney?
The agent appointed by power of attorney may be any adult, and is often a close relative, lawyer or other trusted individual. Of course, a Power of Attorney should not be given to someone the Principal does not fully trust. You should use great care in the selection of your attorney-in-fact. Remember, you are trusting not only your property, but perhaps your life, to the person you appoint.
What is a “Durable” Power of Attorney?
Many people are unaware that an ordinary power of attorney is revoked, and the agent’s power to act for the principal automatically stops, if the principal becomes incapacitated.
Under most state law, a power of attorney with proper wording may be made “durable.” This means that the power of the agent to act on the principal’s behalf continues despite the principal’s incapacity, whether or not a court decrees the principal to be incapacitated.
The document must state in substance that “this power of attorney shall not be affected by subsequent disability or incapacity.”
Through a durable power of attorney, an agent may continue to act on your behalf even after you have had a stroke or other incapacitating illness or accident.
An aging parent may wish to give a durable power of attorney to a responsible adult child so that the child can act on the parent’s behalf and carry on routine matters in the event the parent is disabled or incapacitated. In many instances, this arrangement is far better than making the child the joint owner of the parent’s bank accounts and other property and assets.
It is possible to create a durable power of attorney so that it will only go into effect when the principal is incapacitated or when some other stipulated event or condition occurs. This is ordinarily called a springing durable power of attorney.
What kinds of legal authority can be granted with a Power of Attorney?
A Power of Attorney can be used to grant any, or all, of the following legal powers to an Agent:
- Buy or sell your real estate
- Manage your property
- Conduct your banking transactions
- Invest, or not invest, your money
- Make legal claims and conduct litigation
- Attend to tax and retirement matters
- Make gifts on your behalf
Do I Have to Sign a Power, and if I Do, Will it Be Followed?
No person can be forced to sign a power of attorney, especially one for health care decisions, which cannot be required for admission to a hospital. Once created, your directions must be followed. If a physician or other health care provider declines to follow your instructions due to religious beliefs or moral convictions, such health care provider must transfer the care of the patient to another physician or facility who will honor the patient’s instructions. For this reason, it is always advisable to discuss these issues with your physician in advance of any hospitalization or extensive treatment.
Revocation of Durable Power of Attorney
The death of the principal revokes even a durable power of attorney, except for a third person relying on the power of attorney who does not know of the death. Also, a durable power of attorney may be revoked by the principal at any time, either orally or in writing. It is recommended that, when possible, the revocation be written.
Do I need a Durable Power of Attorney even if my spouse and I own everything “jointly”?
Yes, if you are disabled, your spouse can still sign checks and make withdrawals on joint bank accounts, but your spouse cannot sell jointly owned stocks or your jointly owned home or cottage without your signature. Your spouse cannot name or change a beneficiary on your life insurance or your retirement benefits. Even if you own everything jointly, you both should consider having Durable Powers of Attorney.
How many copies of a Power of Attorney should I sign?
You are required to sign (execute) only one copy. However, it is not unusual for a Principal to sign several original copies. Most financial institutions, for example, generally require an original or a certified copy before allowing an Agent to transact business on the Principal’s behalf.