A power of attorney is a legal document that gives one person the authority to act on behalf of another. The person given the authority to act is known as the agent (who is sometimes referred to as the “attorney-in-fact”). The person on whose behalf the agent may act is referred to as the principal. The attorney-in-fact need not be an actual attorney.
What is Required to Create a Valid Power of Attorney?
A power of attorney is an authorization that must be in writing, and authorizes the agent to act on behalf of the grantor of the power (the principal). An agent may exercise all rights and powers given to the agent under the power of attorney, but may not act beyond the scope of the authorization given to the agent.
Typically, a power of attorney must be signed and dated by the principal. The principal must have sufficient mental capacity to enter into the power of attorney. Other requirements for valid power of attorney creation may include:
- The principal’s acknowledging the power of attorney document before a notary public;
- The agent’s signing and dating the power of attorney document before a notary public.
What Types of Powers of Attorneys Exist?
The length of time for which a power of attorney may last, depends upon whether the power of attorney is a durable power of attorney or a non-durable power of attorney.
A non-durable power of attorney is a power of attorney that is revoked by operation of law by either the grantor’s death or the grantor’s becoming incapacitated. This power of attorney generally remains valid until notice of death or disability is received by the agent.
A durable power of attorney extends beyond the grantor’s incapacity and contains specific language to that effect, such as “This power of attorney shall not be affected by my subsequent disability or incompetence.” Durable powers of attorney may be general or limited in scope. Durable powers of attorney are limited in one significant aspect, in that they do not extend beyond the principal’s death.
What Types of Decisions May a Power of Attorney be Used for?
Powers of attorney can be used for both general and specific purposes.
A general power of attorney is comprehensive in scope. This document generally gives the agent all of the powers and rights that the principal has. For example, a general power of attorney may authorize the attorney-in-fact to:
- Sign documents;
- Pay bills; and
- Make all decisions with respect to the grantor’s real and personal property.
General powers of attorney can be used regardless of whether the principal is incapacitated. A general power of attorney ends upon the grantor’s death or incapacitation, unless the grantor rescinds it earlier.
A power of attorney may authorize the agent to make decisions with respect to something more specific, such as a transaction respecting a single piece of property. A power of attorney authorizing an agent to act on behalf of a principal with respect to a specific, single transaction, is referred to as a limited, or specific, power of attorney.
What are Two Common Scenarios Where Powers of Attorneys are Used?
One common type of durable power of attorney is known as a health care proxy. In a health care proxy, the principal appoints an agent to make health care decisions on behalf of the grantor. A health care proxy does not become effective until a grantor becomes incapacitated, and the proxy remains effective despite the incapacity.
Generally, to be valid, a health care proxy must be in writing and signed by the grantor. States may require that the signing of the proxy be witnessed by one or more adults. The proxy must also contain a provision stating that the grantor appeared to execute the proxy free of duress.
A second purpose for which powers of attorney are also frequently used is for estate planning purposes. A power of attorney may give an agent the right to manage assets that may become property of the grantor’s estate when the grantor dies. For example, a grantor may own a 401(k) account. If a grantor who has created a power of attorney becomes incapacitated, the agent may, provided the power of attorney validly authorizes her to do so, make investment decisions with respect to the 401(k) up until the point the grantor dies.
Do I Need an Attorney to Draft My Power of Attorney?
If you wish to create a power of attorney, you should consult an experienced estate planning attorney. An attorney can assist you with creating a power of attorney that is tailored to your specific needs and circumstances.
Your attorney can also advise you as to what both your and your agent’s rights are with respect to the power attorney. They will be able to represent you in court should a dispute arise as to the scope, validity, or enforceability of the power of attorney.