Power of Attorney
A power of attorney is a legal document appointing another to act in the maker’s place when the maker is unable to take action personally. The maker is called the principal and the person authorized to act on the principal’s behalf is called the agent or attorney-in-fact. All powers of attorney terminate on the death of the principal. A principal may also revoke the power of attorney at any time as long as he or she is competent. A successor agent may be named in the power of attorney to prevent it from lapsing if the first named agent dies or is unable to serve.
There are various types of powers of attorney – they can be either general, durable or limited. Some states have also adopted a statutory power of attorney. A general power of attorney grants the agent broad powers to act in regard to the principal’s assets and property while the principal is alive and not incapacitated. A durable power of attorney will remain effective even if the principal becomes incapacitated. A special or limited power of attorney restricts the agent’s action to a particular purpose in order to handle specific matters when the principal is unavailable or unable to do so. A statutory power of attorney copies the language in a state statute which includes an example of a form that may be used. State laws vary, but the states that have adopted a statutory form of power of attorney typically allow for other language to be used as long as it complies with the state law. A power of attorney may be created for a limited time period and/or specific purpose, such as a Health Care Power of Attorney, Power of Attorney for Care and Custody of Children, Power of Attorney for Real Estate matters and Power of Attorney for the Sale of a Motor Vehicle.
Variations of the types of powers of attorney described above include the springing power of attorney and power of attorney coupled with an interest. A springing power of attorney becomes effective at a future time. That is, it “springs up” upon the occurrence of a specific event described in the power of attorney. That event is typically the illness or disability of the principal. A 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. A power of attorney coupled with an interest is one in which the agent has a specific, present and coexisting interest in the subject of the power or agency. Whether such an interest exists in any particular case is to be determined from the entire agreement between the parties. A power of attorney coupled with an interest is deemed irrevocable on equitable grounds, since the agent would be deprived of a substantial right if the power were revoked.
By creating a power of attorney, the agent may sign documents, make decisions, and take necessary actions when the principal is unable to do so. While a power of attorney may be created in anticipation of a future need, such as military deployment, it also allows another to manage the principal’s affairs when unexpected events occur, such as an accident, illness or unplanned absence. Without a power of attorney, a spouse, parent or other interested party must petition the appropriate court to be appointed as guardian of the incapacitated person, which can be a time-consuming and expensive process.
Power of attorney requirements vary by state, but typically are signed by the principal and need to be witnessed and notarized. Usually, powers of attorney do not need to be recorded. However, powers of attorney dealing with the sale and purchase of real estate must be recorded. In order to revoke, cancel, or end a power of attorney before it expires, the principal must sign a revocation of power of attorney and give a copy of the revocation to any person who might have or will possibly deal with the agent.
