Power of Attorney: What's That About?
- thecompletenotaryn
- 8 hours ago
- 4 min read
A question that we often get from uninformed clients is, "what is a power of attorney and do I need one?" In the unfortunate event that you become incapacitated and are no longer able to make decisions for yourself, having a power of attorney document handy will prove essential.
In simple terms, a power of attorney (POA) is a legal document that allows another person or persons to act on your behalf. You are basically allowing that person to make financial, legal and/or medical decisions for you.
Types of Power of Attorneys
General: a power of attorney that covers all financial or legal matters.
Durable: a power of attorney that remains in effect during incapacity.
Springing: this type of POA becomes active only when a specific event (like incapacitation) occurs.
Special/Limited: these include medical, real estate, and vehicular POAs; they can be temporary and specific.
Key Aspects of a POA
Legal:
The principal (person granting the authority) must be over the age of eighteen (18) and mentally competent when signing. In addition, the document(s) should be signed and dated in the presence of a notary public, and in some cases, other witnesses. The process itself varies by state as it pertains to required forms, complexity, and whether an attorney is needed.
Who Can Be an Agent?
Almost any legally competent adult (18+) can serve as an agent on a power of attorney. It is very important that you choose someone that you trust implicitly; this could be a spouse, child, relative, friend, or community leader.
Responsibilities of an Agent
There is something called fiduciary duty which means that the agent must act in your best interest. The scope of his/her/their duties lies in what decisions you have authorized.
Limitations
Generally, agents cannot change the details within the POA nor change a will. Moreover, their duties end when the principal dies.
Termination
Typically, there are three (3) ways that a POA can be terminated:
Revocation by the principal
Invalidation made by a court
Upon death of the principal.
Undoubtedly, the most common power of attorney in New York law is a durable power of attorney. This means the power of attorney is effective the day you sign it, but that authority continues even if you become incapacitated. With that, you have the option to attach conditions, such as a triggering or terminating date or event. For many persons, a durable power of attorney is the best option.
Further, it is not a requirement to formally file your POA, however, some sates require that specific types of POAs be filed with a court or a government office before they can be deemed valid; so it is best to check your state's requirements beforehand.
Example POA Situation
"When might I need a financial power of attorney?"
A financial POA can be used as a tool to help plan for the future, including the possibility that you’ll be unable to make important financial decisions due to dementia, traumatic brain injury, or another impairment that could affect your mental function. When used for advance planning, a POA generally is durable.
A financial POA can also be used for short-term purposes. For example, a service member being deployed overseas can create a POA so someone can pay bills, sell property, or handle other business in their absence.
Benefits and Dangers of POA
Pros:
Eliminates Court Guardianship: one can handle your affairs without going to court to be named officially as your guardian. This saves time, eliminates legal expenses, and avoids any random court appointed guardian having access to your estate.
Grants Control: you will be the the one to to choose who manages your affairs.
Peace of Mind: knowing that someone you know and trust will take care of your affairs should you become incapacitated.
Protection for Dependents: ensures that your obligations to your family can still be met if you are unable to act.
Operational Convenience: POAs for real property or vehicles allow a designated person to handle your decisions for you if you are traveling or unable to be present.
Business Continuity: your business can continue to operate as usual in your absence.
Cons:
Opportunity to Misuse: the agent may have substantial power which can allow for misuse of assets and/or poor estate management.
Limited Scope: the authorized duties may be too minor for some agents and can also be misunderstood.
Irrevocability Issues: majority of POAs can only be revoked by the principal while in a competent (lucid, aware) state.
Family Conflict: family members may disagree on the terms and authorities defined in a POA as well as the agent assigned - this can cause disputes and even legal battles.
To mitigate these risks it is crucial to select a trustworthy agent, and to clearly define the scope of his/her/their authority.
To sum it all up, by creating a legally sound POA and specifying how it will be carried out if you lose your ability to function, you ensure that you'll have a plan in place for overseeing your affairs; be sure to choose somebody you trust and who will be able to dutifully carry out his/her responsibilities on your behalf.
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