A power of attorney, also known as a letter of attorney, is used to give another party authorization to act on behalf of someone in affairs relating to legal matters.
A power of attorney, also known as a letter of attorney, is used to give another party authorization to act on behalf of someone in affairs relating to legal matters.
The person authorized to make decisions is known as the agent or the attorney-in-fact. The party who is authorizing the agent or attorney-in-fact is referred to as the principal, donor, or grantor.
The power of attorney form allows the agent or attorney to make financial decisions, gifts of money, health care decisions, or even guardianship decisions. The person who is representing the grantor may be entitled to receive payment for their services as an agent. However, the agent could also be a family member, such as a spouse, adult child, family friend, or other relative.
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A power of attorney is a form that bestows certain powers bestowed upon an “attorney-in-fact” or “agent.” It enables said agent to make decisions for a principal person who is somehow incapacitated. There are various types of power-of-attorneys, and the laws governing change from state to state. However, here are a few general points.
What does a power of attorney form deal with?
A power of attorney form serves as a legal definition of the powers granted the agent. This can either be authority to deal with a specific issue, such as critical care treatment, or the power to handle all of the principal’s affairs. The former is called a “specific power of attorney” and the latter is called a “general power of attorney.”
Who is generally granted power of attorney?
An agent should be someone the principal trusts with life-altering decisions. This can be anyone, from a spouse or other family member to a trusted personal friend. It is not advisable to award power of attorney to anyone standing to benefit from a principal’s incapacitation. Despite its name, an attorney-in-fact does not need to be a licensed attorney.
What responsibilities does the agent have in upholding the tenets of a general power of attorney?
To ensure the agent adheres to the agreement, he or she must keep complete records of all actions and transactions made on the principal’s behalf. He or she must also verify, at the start of the agreement, that he or she fully understands all the terms outlined and the extent and limits of his or her responsibilities.
What responsibilities are generally assigned the attorney-in-fact?
A durable power of attorney form may assign the agent any number of responsibilities. Common ones include –
· Management of principal’s financial assets
· Making critical health care decisions, including the decision to begin, continue or cease medical procedures
· The making of a financial or other type of gift or donation
· Guardian election
Does the agent receive compensation?
Ordinarily, yes. The amount of payment is generally determined by the principal and included in the power of attorney document. If for some reason this does not happen, the election of payment amount falls to the court. There is a statute of limitations – the amount issued to the agent may never exceed a certain percentage of the principal’s total property value.
Other tips
For your own protection, it is important that your power of attorney form contain all important details and be written in clear, concise language. This will strengthen the document legally and prevent the agent from misusing his or her power.
A power of attorney (POA) is the legal equivalent of a trust fall. It is one of those documents you simply need to take very seriously. A POA is a document that dictates what will happen to you if, well, something terrible happens to you. You want to be sure that legally speaking, your provide for any eventuality. Whether you’re using a power of attorney template or going freeform, be sure to consider the following:
Who actually needs a POA?
The short answer is – anyone who is suffering from a terminal illness, lives alone and is scheduled for major surgery, leaving the country at time when big plans are in the works (such as the sale of property), or living alone should absolutely have one. Anybody else…really ought to get one. This is because dire circumstances may descend at any time upon anyone at any stage of their life.
That said when creating one, you need to be sure you take all the important legal parameters into account. I’ve detailed all of these below –
Different Types of POA
There are several levels of control you can ascribe your POA agent or “attorney-in-fact.” They are as follows:
General POA – The General POA handles financial transactions, business matters, settlements, and the hiring/firing of employees, among others. If you’re starting a new business, it is a really good idea to have a General Power of Attorney in place.
Special POA – If the attorney-in-fact you pick has a lot on their own plate, such as health or legal issues, you might want specify what powers he or she does and does not have. For example, you may have someone you wish to have handle debt collection or real estate issues, but not be responsible for your business. In this case, a Special POA is appropriate.
Health Care POA – A health care POA is the person responsible specifically for medical decisions. If you are terminally ill, in a serious accident, in a coma or otherwise incapacitated, your health care POA is empowered to oversee your treatment and dictate what happens to you. Note – This is not the same thing as a living will.
Durability Provision
If you become somehow mentally incompetent, due to old age, sickness, accident or other cause, and you want a general power of attorney form to go into effect, you should need to sign what is called durability provision. This provision essentially puts your POA into effect on your behalf should you be unable to make that decision. Be sure the durability provision dictates that you must be pronounced mentally incompetent by a medical professional, not just a friend or family member.
Have multiple attorneys-in-fact
This doesn’t mean you should have multiple attorneys-in-fact at once. This would get pretty confusing! However, you should have one primary agent and one or two backups listed on your POA, just in case something tragic happens to Agent #1. If you happen to be in possession of considerable wealth or extremely jealous friends, I suggest you choose your alternative POA agents wisely. You don’t want to turn your life into a Dickens novel by pitting rival confidantes against one another.
Instruct your agent to keep record of all actions
To ensure no wrong has been done on your behalf while your POA is in effect, make it a provision of the POA that the agent(s) must keep complete record of all transactions and decisions conducted under your name.
Be sure you certify your POA
This means distributing several copies, all signed by you and a notary public . A POA cannot go into effect if it is not certified.
No one likes planning for worst-case scenarios, but it’s a worthwhile task. A power of attorney is a form that passes the power to make life-changing decisions from you to another individual. It’s a way of preparing for disasters such as extreme illness, traumatic or fatal accidents and psychological instability caused by age or mental illness. The content of a POA form varies wildly from situation to situation. However, the basic components are as follows.
Details of involved parties
In this section, you should include the full legal names and addresses of the principle and the agent. The principle is the person giving the power of attorney, the agent, or “attorney in fact” is the person receiving it.
Types
The next thing you need to do is determine what kind of power you are ascribing. There a few basic types of power of attorney you can assign.
General
This type of agent can perform duties ranging from financial transactions to life-altering medical decisions. When you assign general power of attorney, you are essentially giving someone the right to take over all aspects of your life in the event that you become incapacitated. A general power of attorney should be someone you trust completely.
Specific
This type of agent is limited to fulfilling certain responsibilities, which are detailed in the form. Oftentimes a specific power of attorney grants someone the right to manage finances but not medical issues, or vice versa.
Health Care
This agent is specifically responsibly for making healthcare decisions. This is the person entrusted with decisions involving life support, drastic medical procedures, etc.
Durability Clause
This is a common clause in durable power of attorney forms. It stipulates that your chosen agent assumes responsibility in the event that you become incapacitated. The nature of said incapacitation must be detailed elsewhere in the form.
Statement of terms under which power of attorney is assumed
The details of this are more or less up to you. You could will that your POA comes into effect when you go into a coma, suffer other traumatic brain damage, have reached a certain advanced state of degenerative illness, or experienced a psychotic break. Tailor this to suit your personal needs.
Signatures
Your POA form should be signed and dated by you, the agent to whom powers are being ascribed and a witness. It should also be dated.
A power of attorney is an important document because it essentially gives another person the legal right to make personal, business, and even financial decisions on your behalf. While they can be used in many instances, this guide explains a power of attorney for some of the most commonly used scenarios: caregiving for adults, immigration, guardianship, to protect the best interest of someone who is temporarily unable to make their own decisions (for instance, a member of the U.S. military who leaves the country in the course of duty), to handle trust or estate decisions, and to make healthcare decisions.
Before we begin our discussion on the scenarios that most generally involve a power of attorney, we should discuss the five basic power of attorneys. When you’re considering a power of attorney, it’s important that you understand how these differ because each one works in a certain way. For instance, if you or someone you love is a member of the military and is going out of the country, you’d want to choose a power of attorney that gives someone the ability to pay your expenses and make decisions, if needed. Yet, because you’re scheduled to return to the United States, you wouldn’t want someone to continue to have control of your finances once you’re back in the states to make those decisions. So, there’s a special sort of power of attorney that you’d want to use.
With a general power of attorney, one person (known as the principal) gives permission to another person (usually referred to as the agent or attorney in fact) to manage their assets and financial affairs while the principal is still alive. The agent can be given the legal right to do anything that the principal has the ability to do. So, the agent could pay bills, control a checking or savings account, sell real estate, make decisions related to stocks or retirement accounts, and more.
Because this legal document grants the agent substantial power, it’s important for the principal to list out clear instructions about what the agent can and cannot do. For a general power of attorney to be activated, the principal should have legal capacity to enter into this agreement. This means that the principal must be over the age of 18 and be able to understand what it is that they’re doing by entering into this agreement.
With a general power of attorney, a clause can be added to end the power of attorney within a certain time frame. Additionally, if a problem arises, the principal has the ability to revoke the power of attorney at any time (as long as they still have the legal capacity to make that decision). The power of attorney would end in the event of the principal’s death or when the principal becomes incapacitated.
A durable power of attorney is a legal document that uses the same terms as a general power of attorney. The person who is giving the power is the principal. The person who will hold the power will either be referred to as either the agent or as the attorney in fact. It still gives power to the agent to act on behalf of the principal. The difference between a durable power of attorney and other forms is that if the principal becomes disabled or incapacitated in some way, the agent would still hold power. So, that’s what makes it durable. It doesn’t end. However, if you want your power of attorney to be durable and for your agent to continue to have power if you become disable or incapacitated, make sure that your power of attorney explicitly states that it is durable. That one word makes all the difference.
A special power of attorney is another name for a limited power of attorney. With this type of power of attorney, the principal is giving the agent or attorney in fact the power to make decisions on their behalf, but it is done so under certain circumstances. Those circumstances must be clearly explained in the power of attorney. The principal can also specify the power that the agent has. For instance, may be the agent has permission to access the bank account of the principal to pay the principal’s expenses, but the agent may not be given the power to sell real estate or possessions of the principal. If the principal becomes incapacitated or dies, a special power of attorney will no longer be valid.
As mentioned in the previous section, a limited power of attorney and a special power of attorney are essentially the same thing. However, we’re going to discuss it again here. A limited power of attorney involves the principal giving specific powers to the agent. These powers are explicitly mentioned in the limited power of attorney. So, while the agent may be given permission to access a checking account to pay the monthly expenses of the principal, they may not have permission to make decisions related to medical care or retirement accounts. Both a limited and a special power of attorney are limited for the purpose of handling certain affairs on behalf of the principal because the principal is unavailable to unable to do it for some reason. A common reason someone would use this type of POA is if the person were leaving the United States for a specific period of time and had the intention of returning. If the principal becomes incapacitated or dies, a limited power of attorney will cease to be valid.
A medical power of attorney is more commonly referred to as a health care power of attorney (HCPOA). It uses the same terms of principal and either agent or attorney in fact. You’ve probably noticed that under the other POAs we’ve discussed that those typically end (with the exception of a durable power of attorney) if someone becomes incapacitated. With a medical power of attorney, you’re creating a legal document that gives someone permission to make medical decisions on your behalf if you’re unable to do so. It’s important to note that you don’t have to be terminally ill, involved in a high risk occupation or activity, or elderly to use this document. Your agent will have the ability to consent, refuse, or withdraw medical treatment, services, or procedures on your behalf.
Now that you understand the basic differences between power of attorney documents, you need to understand the basics about entering into one. First, of course, you need to choose one that best fits your needs. Remember, if you want or need someone to remain able to make specific decisions for you if you become disabled or incapable of making your own decisions, you need to make sure that your power of attorney specifies that it is durable.
After you’ve chosen the right type of POA for your needs, think about the powers that you want or need your agent to have. Make sure that you explain it very, very clearly. This helps protect you and ensures that your agent understands what you need from them.
Your power of attorney should meet any criteria laid out by the state. POAs are state specific. That is, they must meet certain rules in the state for the document to be enforced. For instance, the principal must be over the age of 18 and they must have the legal capacity to enter into the agreement. The agent must be over the age of 18 and have the legal capacity to enter into the agreement. In many states, a power of attorney must be notarized. So, you wouldn’t sign the power of attorney until you were in front of a notary public. Some states also require that a power of attorney form have witnesses. Most of the time, the agent cannot also act as your witness. You’ll need two people who are over the age of 18 who will witness your signature. Sometimes, the POA must be witnesses in front of the notary as well.
If you’re a caregiver for an elderly parent or other loved one, you should understand how a power of attorney works. You should also understand that if your elderly loved one asks you to get involved in a power of attorney, there are some things that you need to know:
As a caregiver, you may be taking care of someone who has an illness that will get worse over time. With a medical power of attorney, you’ll have the ability to make medical decisions on behalf of your loved one. A medical power of attorney is very helpful even if your loved one is in the beginning stages of a physical or mental illness. This document gives you the ability to make appointments on their behalf.
Keep in mind, though, that a medical power of attorney must be entered into while the principal is in the proper state of mind. They must be able to understand what it is that they’re signing and how it affects them.
If you are considering naming an agent to make medical decisions for you, make sure that it is someone you implicitly trust. This person will have the power to make treatment decisions on your behalf. This also includes end of life decisions. You should also consider completing an advanced healthcare directive to express your wishes to your medical care team.
There are a number of reasons why it may be beneficial for a caregiver to have the legal authority to handle financial, personal, and business affairs of an elderly loved one. Certain physical ailments can make it difficult to go to the bank, write out checks, or even see a computer screen to pay bills online. Hearing loss could make it difficult to pay bills over the phone.
Much like a medical power of attorney, a general or durable power of attorney shouldn’t be entered into without the principal understanding exactly what it is that they’re doing. They must have the legal capacity to consent. The principal should also clearly explain what the agent can and cannot do. For instance, the agent may have permission to pay bills online, write out checks to pay bills, and even to do the necessary shopping. Business decisions may also be delegated. However, agents may also be given the legal ability to buy and sell property on behalf of the principal. That’s why it is so important for the principal to explain what the agents can and can’t do on their behalf.
Common powers given to an agent include:
Because of the amount of power that can be given, it is important that principals understand and really know who they’re signing this power over to and they should never sign out of distress. Not everyone is honest and will act in the best interest of the principal once they have legal access to make these financial decisions. It can sometimes result in abuse or neglect. If you suspect abuse or neglect by someone who holds a power of attorney as a caregiver, contact adult protective services in your area
While there’s not necessarily a right or wrong way to choose an agent, there are some people the principal may want to consider first. A spouse, an adult child, an adult niece or nephew, an adult sibling, or a trusted friend can act as an agent. The important part, as stated in the last section, is to make sure that the person chosen truly has only the best interest of the principal in mind.
Agents are sometimes paid. Because of this, the principal and the agent should agree on an amount in advance. If the principal doesn’t pay as agreed, the court can determine how much should be paid. When it comes to choosing an agent, the power of attorney should include some specific language that obligates the agent to keep accurate records related to the powers given to them and how those powers are exercised. The power of attorney should also include a limit on gift giving by the agent as well.
There’s a lot of attention given to immigration right now. Parents who came to America either illegally or overstayed their visas and gave birth to children in the United States may be in danger of being deported. Because of this, many parents concerned with deportation have turned to power of attorney documents to give a trusted friend and citizen the permission they need to take care of their children.
In the case of a parent worried about deportation, a power of attorney can be drawn up to give a trusted friend or family member the legal authority to make school, medical, and other important decisions on behalf of their children.
Some parents worry that signing a power of attorney giving someone else the ability to make decisions for their children will strip them of their rights of a parent. Keep in mind that power of attorneys can be written with a trigger that puts the authority into motion. Yet, because a power of attorney is a legal document, someone who may want to use it to ensure that their children are taken care of should understand what they’re signing and should seek out qualified legal advice.
One of the highlights of choosing a power of attorney over legal guardianship is that parents signing a power of attorney do not have to appear in court.
Sometimes, a person may need a legal guardian or a conservator. The purpose of a legal guardian or a conservator is to protect those who cannot make their own decisions. It could be because they have a mental illness, a developmental delay, the inability to communicate because of a medical condition (such as a stroke), or because of an issue such as dementia that often comes with an advanced age. While guardianship is usually given to a family member or friend, if one isn’t available, the court can appoint a total stranger to make those decisions.
There are horror stories of elderly and disabled people being taken advantage of and physically and financially abused. Completing a power of attorney for your medical decisions and for your financial and personal decisions before the likelihood that you need a guardian can help prevent this sort of abuse.
With a power of attorney, you can elect someone that you know and trust to make financial, personal, and medical decisions on your behalf. You can choose to make your power of attorney durable so that it will still remain active if you become unable to make your own decisions.
However, because your needs will change over time, it’s important to keep both your personal and medical power of attorneys up to date. You can keep both a hard copy in your home and store a copy online as well after it’s signed.
Remember that these documents are important because it means that the court doesn’t have to make these decisions for you. While the courts mean well, their time is limited and there’s always a chance that your wishes aren’t honored if they’re not written down somewhere.
Also, keep in mind that a power of attorney is a private process. It’s between you, the agent, a couple of witnesses (most likely), a notary (in most states), and maybe an attorney. It’s not put on file with the court (although you and your agent should have copies). Yet, it is still private because it still remains within your inner circle. With a guardianship or a conservatorship, you’re dealing with a public record that is created by the court. This means that anyone can go to the court and pull copies of the documents because they are considered public record. So, if you value your privacy, you may consider power of attorney documents for personal, financial, and medical elections instead of allowing the court to make those decisions on your behalf.
Sometimes, people decide to work with an attorney to create a trust of some sort (one of the most common being a revocable living trust). A trust can be used for many purposes. A power of attorney can work with a trust, but the power that your agent or attorney in fact will have will ultimately depend on the jurisdiction in which you live. Common things that your agent or attorney in fact may have the power to do in your jurisdiction includes:
If you don’t have a trust, you may want to consider one not just to protect your assets, but for tax benefits. However, even if you don’t think that a trust of any sort is in your best interest, you should keep in mind that your named agent or attorney in fact may think otherwise. Check with an estate attorney in your state to find out if the person you name would have the power to set up a trust of some sort on your behalf. Even if you don’t have a trust, read the next paragraph because there’s something important you need to know.
We’ve already discussed some of the things that your agent or attorney in fact can do with regard to your trust. So, how do you make sure that your trust is used only in the way that you want it to be used? Well, aside from appointing someone who you truly believe has your best interest at heart, you should ensure that you clearly list out what your agent or attorney in fact can and cannot do in regards to your trust.
Whether you’re choosing a power of attorney because you’re going overseas with the military or because you need help making your financial, business, or medical decisions, you must make sure that you protect yourself as a consumer. Remember that the purpose of a power of attorney of any sort is to help you pay your bills and make your decisions.
As briefly mentioned, someone can end up not having your best interest at heart. As a consumer, you should know that abuse of a power of attorney can take place in many forms. The most common ways include:
When it comes to making medical decisions on your behalf, you’ve already learned in this guide that most power of attorneys will end if you become incapacitated or disabled in some way. You can set up a power of attorney to appoint someone to make medical decisions on your behalf. Although it may seem cumbersome, it is often easier to have two power of attorney documents: one for your personal and financial decisions and then one for your medical needs.
It’s also important for you to consider an advanced directive or living will. The purpose of an advanced directive or living will is to explain to your family and medical team what your wishes are related to your care. This is important because you need your family (or closest friends) and your doctor what your wishes are related to your medical treatment, when treatment should be halted, your end of life decisions (such as a Do Not Resuscitate or to withhold food and liquid), and anything else that you want people to know about how you’d like your medical needs met. This helps clarify for your agent and your medical team what you want and how they can proceed to honor your wishes.
Another important reason to separate your financial / personal power of attorney from your medical power of attorney has to do with the agent. The person you name to make your financial and personal decisions may not be the best person to make your medical decisions. They may not feel comfortable doing it. They may not feel like they can make those decisions. So, when you separate out these issues into two power of attorney forms, you can name two separate agents.
There are many things you should think about when it comes to drafting your power of attorney. And it’s important that you think about those things because it helps you minimize complicates later in your life. We’ve highlighted the importance of ensuring that you’ve thoroughly explained in a power of attorney when your agent has your permission to do, when they can do it, the time period they can perform their duties, whether the document is durable, and your wishes as they relate to your medical care. We’ve also reminded you of the importance of choosing an agent or attorney in fact who will keep your best interest at the top of their mind.
Something else you must do is to reassess your power of attorney on a regular basis. People get married. They get divorced. They change their names. They change their minds. They move away. There are lots of things that can happen that could cause a complication in the future when the power of attorney is actually needed. For instance, if you name your adult child as your agent and you use their first and last name, although they go by their middle name, they may not be able to access your accounts if their identification lists their middle name as their main name. So, make sure that you word your power of attorney in a way that will help your agent take action on your behalf. For instance, if you name John Edward Doe as your agent, but he goes by Eddie Doe, then you’d want to word it as “John Edward Doe AKA Eddie Doe” or in some other comparable way. This doesn’t just make it easier for your power of attorney to access your accounts. It also cuts down on a potentially lengthy and expensive court case.
Also, if you are a person of substantial means, make sure that your agent knows where all of your money is kept. Although you will certainly need to have the utmost trust in your agent, it also ensures that the care you need, be it medical, legal, or some other form of help, can be paid for from your accounts with ease.
In summation, a power of attorney form is a legal document that will never become a fad, or something you discuss during a happy hour with friends. Nonetheless, it is a form that will always become important during your most challenging life experiences, so we hope that this guide will serve as a valuable educational reminder and introduction to the ins-and-outs of a power of attorney and a resource that you can always bookmark to share with a family member, friend, or colleague when the time is appropriate.
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