As an elder law attorney, I routinely give advice and recommendations to my clients regarding Powers of Attorney and advance directives. A Power of Attorney typically deals with financial issues, whereas advance directives address issues related to health care such as a Living Will, a Designation of Health Care Surrogate, and a Do Not Resuscitate Order. This article specifically addresses the different types and the basic requirements for drafting a Power of Attorney.
A Power of Attorney in its simplest form is a written delegation of authority from one person (principal) to another person (attorney-in-fact) to do things on behalf of the person granting the authority. More specifically, it is a document that gives the attorney-in-fact the authority to do virtually anything the principal could do with a few general exceptions.
A Power of Attorney must be in writing, signed by the principal in the presence of two witnesses. If the Power of Attorney will need to be recorded in the public records, it should also be notarized. A common example is if the Power of Attorney is being used in a real estate transaction.
Anyone over 18 years of age and who is of sound mind can act as an attorney-in-fact. There are also very narrow circumstances in which a corporation may qualify. What I always tell my clients is that the Power of Attorney is literally the key to the bank. You need to make sure whoever you name is someone you trust! More than one person can act as an attorney-in-fact; however, I do not recommend this as there is the potential for conflicts between attorneys-in-fact. Instead, I recommend naming one individual as your attorney-in-fact and at least one alternate should the first person be unable or unwilling to serve.
There are several types of Powers of Attorney. I highly recommend discussing the pros and cons of each type of Power of Attorney with an attorney prior to executing such a document. Which document is right for you will depend on a number of factors.
A General Power of Attorney goes into effect immediately. Both the principal and the attorney-in-fact can act. A General Power of Attorney stays in effect until the principal dies, revokes the Power of Attorney, or becomes incapacitated.
A Durable Power of Attorney goes into effect immediately. Both the principal and attorney-in-fact can act unless the principal becomes incapacitated. A Durable Power of Attorney stays in effect until the principal dies or revokes the Power of Attorney. Unlike the General Power of Attorney, it stays in effect even if the principal becomes incapacitated.
A Limited Power of Attorney goes into effect immediately. Both the principal and the attorney-in-fact can act. A Limited Power of Attorney terminates at a set time, by revocation, or death.
A Springing Power of Attorney is the only type that does not go into effect immediately. Instead, it goes into effect when the principal lacks capacity to manage their property. This must be documented by an affidavit by the principal’s primary physician.
There are a number of ways to revoke a Power of Attorney such as executing a new one or executing a written statement declaring revocation. They can be revoked fully or partially. What is important to note is that if you provide a Power of Attorney to a third party, such as a bank, you must notify the third party of revocation. If you do not notify the third party and they rely upon the Power of Attorney, they cannot be held liable.
There are many advantages to including Powers of Attorney as part of your estate plan. They are easy to establish, inexpensive, and do not require court oversight. I recommend that you review your estate planning documents and discuss with your legal advisor whether or not a Power of Attorney is right for you.
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