Power of Attorney
Understanding a Power of Attorney is crucial when it comes to caring for family members or close friends. Obtaining power is more than a political escapade or a superhero crashing through a wall. Power, in this context, is closely tied with authority to act on another’s behalf. A Power of Attorney allows an individual (the Principal) to designate one or more trusted people (Agent or Attorney-in-Fact) to step into his or her shoes. Agents should be competent, trustworthy, and capable of finding advisors to help them execute their fiduciary duties. This document must be legally executed and clearly provide the left and right limits on the Agent’s authority to act in the Principal’s stead. The Principal grants to an agent authority to do all acts that a Principal could do. The Principal must have Capacity to create a Power of attorney, meaning that he or she has no impairment in the ability to receive and evaluate information or make or communicate decisions.
The Principal may designate that the agent has the authority to execute a broad range of duties. In other circumstances, the Principal may designate an agent to act for a very specific purpose. These duties may include managing finances, paying bills, selling property, obtaining medical care, etc. Let’s take a look at three examples below: General, Healthcare, and Special.
General
A General Power of Attorney is fairly self-explanatory. An agent acting under this document has broad authority, granted by the Principal, to act generally on his or her behalf. This may include filing taxes, signing checks, managing assets, making business decisions, or any other legal act specified by law. More specifically, a Financial Power of Attorney under this category may include the authority to open and close bank accounts, or withdraw funds to pay bills. This document generally terminates upon the incapacity of the Principal, unless otherwise specified.
Healthcare
A Healthcare Power of Attorney gives an Agent the authority to act on medical decisions of the Principal. Probably the most important aspect of a properly executed Healthcare Power of Attorney is access to medical information. The Health Insurance Portability and Accountability Act, or HIPAA, operates to ensure covered entities do not improperly disclose a patient’s health information. Thus, attempting to act without authority on another’s behalf will often result in a refusal to provide the requested information. A covered entity’s employees will not even be able to confirm or deny a patient’s admittance at a healthcare facility.
Special
A Special, or Limited, Power of Attorney should be given more consideration for the general public. This document involves a Principal granting an Agent the authority to act for a specific purpose and that authority should terminate after the agreement is completed or at a time specified in the document. This could include a broad range of circumstances such as selling a vehicle, signing a contract, real estate transactions, requesting an absentee ballot, temporary custody of a minor, or some other one-time use. This authority is limited, specific, and terminable. It may be a better option than a general grant of authority if there is a specific task to be accomplished.
Springing Versus Durable Power of Attorney
Although there are many types of Powers of Attorney, it is imperative that the time of effect is included in the document. A Springing Power of Attorney means that while it is executed on a certain date, it will not go into effect until an event causing incapacity occurs. A Durable Power of Attorney survives the incapacity of the Principal and goes into effect immediately. Durability also means that while a Principal has capacity, he or she may want the Agent to begin acting immediately to handle certain affairs. In both situations, an affidavit specifying that a Power of Attorney is in effect will accompany the executed documents. Speak with an attorney who specializes in these matters because some states, such as Florida, require that Powers of Attorney go into effect immediately to be valid.*
Important Reminders
A few important tips when it comes to executing a Power of Attorney.
Signing a Power of Attorney
A Power of Attorney must be signed, dated, and acknowledged before a notary public or attested by two, non-caregiving witnesses. RCW 11.125.050. A Principal who is physically unable to sign their name may make a mark that is acknowledged by an authorized notary or officer.
Signing Documents as an Agent
Be sure to check with a financial institution or other organization on how to properly execute documents on a Principal’s behalf. Unless otherwise specified by law or practice, an agent may sign the following ways:
“John Doe, by Bill Smith as Power of Attorney”
“John Doe, by Bill Smith, POA”
“Bill Smith, POA”
“Bill Smith, Attorney-in-Fact for John Doe”
Naming Successor Agents
When Powers of Attorney are executed, the Principal may name an agent or co-agents, but neglect to name successor agents. Successor Agents are granted authority in the event that the named agents refuse, resign, die, or are otherwise unable to serve. Often, estate planning causes an individual to think of one or two trusted people and hope all will be taken care of. Issues may arise when a financial institution or organization wants proof that the initial agent is unable to serve.
Notify Agents
Powers of Attorney often include phone numbers and address. Today, there isn’t always a requirement to notify a person that they are named as an agent in a Power of Attorney. It is always a good idea to notify a potential Agent before and after naming them in a legal document. They should also be provided with a copy of the document to understand the duties that they are taking on. Even successor agents should be notified in order to prepare them for the likelihood that they may need to step in.
Make a Plan
Powers of attorney are useful tools in naming a competent person to handle your affairs in the event that you cannot. Understanding how and when to use them can be a great relief for all parties involved. After choosing the type of document needed and a competent agent, make a plan to periodically review whether you need a power of attorney.
Updated: Oct 28, 2020
