Powers of Attorney

A power of attorney is a document granting an attorney-in-fact — who may be any competent adult, not necessarily a lawyer — the power to make certain decisions on behalf of the person giving that power (the principal). The attorney-in-fact acts as the principal’s agent, and the document authorizes his or her actions over whatever activities the principal specifies. Most commonly, a power of attorney grants authority to manage the principal’s financial dealings. The principal may remove the power by revoking it or by setting a time limit. Otherwise, the power ends when the principal dies or, in some cases, when the principal becomes incapacitated.

Example: Natalie must go out of town on business, but she is in the process of selling her house and expects she may receive a bid during her absence. She grants a power of attorney to her brother only for the purpose of reviewing bids and acting for her to accept the first one that meets Natalie’s criteria. She puts a time limit on the power so it will end on the day she returns from her trip.

A problem with the general power of attorney is that the agent loses authority when the principal becomes incompetent, and this is often when the power is needed most. A durable power of attorney differs from other powers of attorney in that it remains effective even when the principal becomes mentally incapacitated. It can also be used to make decisions about a person’s medical treatment. All fifty states have adopted the durable power of attorney by statute, but the statutory provisions vary. Since variations exist from state to state, it is imperative to examine the laws of your state.

Generally, a durable power of attorney either becomes or remains effective when the principal becomes incapacitated. A durable power of attorney for healthcare decisions grants the attorney-in-fact the power to make decisions about the principal’s health care whenever he or she is unable to communicate on the subject. A durable power of attorney also can maintain the attorney-in-fact’s power to manage all or some of the principal’s financial relationships should the principal become incapacitated.

Choose wisely when naming your attorney-in-fact.  Under your durable power of attorney document, your attorney-in-fact will have the authority to access and manage your bank accounts and other assets.  Therefore, that person must be someone who is trustworthy and who is either qualified to handle financial matters or knowledgeable enough to hire a qualified individual to assist in financial matters.