A Power of Attorney is a legal instrument that is used to delegate legal authority to another. The person who signs (executes) a Power of Attorney is called the Principal. The power of attorney gives legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the Principal.
A Principal can give an Agent broad legal authority, or very limited authority. The Power of Attorney is frequently used to help in the event of a Principal's illness or disability, or in legal transactions where the principal cannot be present to sign necessary legal documents.
Common Questions About a Power of Attorney
Are There different types of powers of attorney?
Yes. There are "Nondurable ," "Durable," and "Springing" Power of Attorney. A "Nondurable" Power of Attorney takes effect immediately. It remains in effect until it is revoked by the Principal, or until the Principal becomes mentally incompetent or dies.
A "Nondurable" Power of Attorney is often used for a specific transaction, like the closing on the sale of residence, or the handling of the Principal's financial affairs while the Principal is traveling outside of the country.
A "Durable" Power of Attorney enables the Agent to act for the Principal even after the Principal is not mentally competent or physically able to make decisions. The "Durable" Power of Attorney may be used immediately, and is effective until it is revoked by the Principal, or until the Principal's death.
A "Springing" Power of Attorney becomes effective at a future time. That is, it "springs up" upon the happenings of a specific event chosen by the Power of Attorney. Often that event is the illness or disability of the Principal. The "Springing" Power of Attorney will frequently provide that the Principal's physician will determine whether the Principal is competent to handle his or her financial affairs. A "Springing" Power of Attorney remains in effect until the Principal's death, or until revoked by a court.
When is it appropriate to use a "Durable" or "Springing" Power of Attorney?
"Durable" and "Springing" Powers of Attorney are frequently used to plan for a Principal's future incapacity or disability and loss of competence resulting, for example, from Alzheimer's Disease or a catastrophic accident.
By appointing an Agent under a "Durable" or "Springing" Power of Attorney, the Principal is setting up a procedure for the management of his or her financial affairs in the event of incompetence or disability. A "Nondurable" Power of Attorney enables a Principal to decide in advance who will make important financial and business decisions in the future. They are also helpful in avoiding the expense of having a court appoint a Guardian to handle the Principal's affairs in the event of incompetence or disability.
What kinds of legal authority can be granted with a Power of Attorney?
Whether "Nondurable," "Durable," or "Springing," a Power of Attorney can be used to grant any, or all, of the following legal powers to an Agent:
Once I sign a Power of Attorney, may I continue to make legal and financial decisions for myself?
Yes. The Agent named in a Power of Attorney is your representative, not your "boss." As long as you have the legal capacity to make decisions, you can direct your Agent to do only those things that you want done.
What are an Agent's obligations to a Principal?
The Agent is obligated to act in the best interests of the Principal, and to avoid any "self-dealing." Self-dealing is acting to further the selfish interests of the Agent, rather than the best interest of the Principal.
An Agent appointed in a Power of Attorney is a fiduciary, with strict standards of honesty, loyalty and candor to the Principal. An Agent must safeguard the Principal's property, and keep it separate from the Agent's personal property. Money should be kept in a separate bank account for the benefit of the Principal. Agents must also keep accurate financial records of their activities, and provide complete and periodic accountings for all money and property coming into their possession.
Make clear to your Agent that you want accurate records of all transactions completed for you, and to give you periodic accountings. You can also direct your Agent to provide an accounting to a third party-a member of your family or trusted friend-in the event you are unable to review the accounting yourself.
Am I required to file a Power of Attorney in a government office?
Not unless the Power of Attorney is used in a real estate transaction. In that case, it must be files in the County Clerk's office. And when you file in the County Clerk's office, the Power of Attorney is a public record open to inspection by the public. A writing that revokes a filed Power of Attorney should also be filed in the County Clerk's office.
If you file a Power of Attorney in the County Clerk's office, you will be able to get additional "certified" copies from the County Clerk for a small fee. A certified copy is legally equivalent to the original document. It is often convenient to have certified copies of your Power of Attorney on hand.
For immediate assistance with establishing a Power of Attorney, or for any of your estate planning needs, call us toll-free at 1-405-691-2555