A valid power of attorney can greatly assist you and your family during a crisis, including your death. It can also be helpful if you set up a trust.
A power of attorney is a legal document by which you give another person the authority to make decisions on your behalf when you become incapable of doing so due to injury, illness, death, or other circumstances. The name of your role is the “principal.” The person you give the authority to act for you is known as the “agent” (or, in many cases, as the “attorney-in-fact.” An agent or an attorney-in-fact does not have to be an actual attorney. Many people commonly designate a family member or close friend as their agent or attorney-in-fact.
Giving someone a power of attorney simply means that you are allowing someone else to take on the responsibilities to deal with certain aspects of your finances that normally only you would be allowed to handle.
Many powers of attorney can specifically address one or more aspects of your finances, including giving your agent the authority to:
- Submit your will to probate court. A probate court is a specialized court that can determine the legal validity of the deceased person’s will or correctly distribute the estate’s assets to any beneficiaries named in the will.
- Pay your bills, including taxes.
- Buy or sell property, including taking out a mortgage or selling your car
- Hire someone to represent you in court if necessary.
- Sign off on investment or bank transactions.
- Sign off on insurance policies.
- Other affairs, such as making repairs to your home or running your business.
Someone granted power of attorney cannot simply do as they please. Instead, they take on the responsibility of acting in your best interests.
Under What Circumstances and to What Extent May an Agent Act on the Principal’s Behalf?
The extent to which an agent can act on the principal’s behalf is contained within the power of attorney document. There are three basic power of attorney privileges:
- General: A general power of attorney gives the agent the broadest authority over the principal’s interests. It grants the agent all of the same powers and rights as the principal has or had
- Special: A special power of attorney specifies which decisions the agent may make on the principal’s behalf. For example, a principal may want to allow the agent to handle only their real estate
- Health Care: A health care power of attorney authorizes the agent to make medical decisions on behalf of the principal if the principal is not able to make their own medical decisions
What is Required to Create a Valid Power of Attorney?
A power of attorney must be in writing. The principal must have sufficient mental capacity to authorize the power of attorney. The principal and the agent must sign the power of attorney document in front of a notary public.
What if I Don’t Have a Power of Attorney in my Will?
You are not required to have a power of attorney in your will or trust. However, if you die or cannot manage your own affairs, things will be more difficult for you and your family if you have not granted someone a power of attorney.
Often, if you do not have a power of attorney and you become incapacitated or die, your state may require a court hearing to prove that you were mentally competent when you gave the power of attorney to your agent. If you have not designated an agent, the court will appoint a legal guardian to act in your best interests. Having a power of attorney in place avoids any undue delay in case something were to happen to you and avoids the possibility of having a stranger appointed as your agent.
If I Give Someone a Power of Attorney, When Does it Become Effective?
You can control when the power of attorney goes into effect by drafting it carefully to coincide with your wishes. You can decide to have it go into effect once it has been signed. Or, of course, you could also make a power of attorney conditional upon your first becoming incapacitated or on your death.
If a power of attorney only becomes effective if you have become incapacitated, then the document should detail how to determine whether you are incapacitated. Examples would be lying in a coma and not expected to recover, suffering permanent and severe brain damage, being close to death, and suffering from a memory and analytical disease such as Alzheimer’s.
If you die, a traditional power of attorney is automatically canceled. Your agent cannot continue to manage affairs for you after your death. If you want that person to have control of your finances and affairs after you die, then you must name them as executor of your estate in your will or trust or give them a power of attorney in the will or trust document.
Can I End the Power of Attorney Whenever I Want?
Yes. Just like you can control when the power of attorney becomes effective, you can also control when the power of attorney ends. Certain circumstances will cancel the power of attorney. These include:
- You can cancel or revoke the power of attorney yourself at any time
- In most states, if you grant your spouse power of attorney and you end up getting divorced, your spouse’s power of attorney may automatically become null and void
- If your agent is unavailable when needed, their power may be canceled. For this reason, it is a good idea to name an alternate agent
- If there is some sign of fraud, or if you were not mentally competent at the time you signed the power of attorney, a court may declare it void or invalid
What Are Power of Attorney Scams?
Power of attorney scams arise when an individual deceives another individual into allowing them to act as their agent. This happens most often to elderly individuals. Usually, this type of scam is perpetrated by family members. The purpose of the deception is typically to obtain some or all of the principal’s property for the agent, often without anyone else knowing anything about the embezzlement.
Should I Consult A Lawyer for a Power of Attorney?
Naming a person to serve as your legal agent is an important decision. Your agent will have power over your finances and business, so you want to choose someone trustworthy. Deciding which finances or other affairs your agent will be allowed to control is also important and can be a complex process.
A qualified will attorney (an estate attorney) or a trust attorney can ensure that your power of attorney is tailored to your specific needs and circumstances. They can help you decide on the right person to take on the responsibilities of an agent. Your attorney can also help you determine which financial matters would be the most appropriate and safest to allow your agent to handle and which financial matters you might want to keep confidential and not grant to an agent.
Your attorney can also draft the document that bestows the power of attorney on your selected agent, making sure that it covers exactly the assets and topics that you want and need it to do. Should a dispute arise related to the power of attorney’s scope, validity, or enforceability, your attorney will represent you in court.