You may already be familiar with the basic concept behind a Power of Attorney. In fact, you may have already executed a Power of Attorney (POA) and/or been named as the Agent under a POA for one reason or another. Unfortunately, a Power of Attorney is also one of the most frequently abused legal documents. One reason for that is that all too often the person creating the POA does not truly understand the power and authority conveyed in the document.
Power of Attorney Basics – What Is a Power of Attorney?
At its most basic, a Power of Attorney is a legal document that allows you (referred to as the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. The type and extent of the legal authority you grant to an Agent depends on the type of POA you execute. Failing to understand the extent of the authority granted in a POA is a common, and potentially very dangerous, estate planning mistake.
General vs. Limited Power of Attorney
A POA can be either general or limited. A general POA grants your Agent almost unlimited power to act on your behalf. This means that your Agent may be able to do things such as withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name. Although the law places some limits on the actions of an Agent with a general POA, you should never give someone a general POA if you have any doubt about their trustworthiness.
A limited POA only grants to your Agent the limited, and specific, authority enumerated in the POA. For example, you might grant an Agent the specific power of attorney to act on your behalf during the sale of your vehicle while you are out of the state on a business trip.
Durable Power of Attorney
You also need to know the distinction between a traditional and a durable Power of Attorney. Historically, the authority granted to an Agent in a POA automatically terminated upon the death or incapacity of the Principal. As you may well imagine, however, the possibility of becoming incapacitated is a common motivation for executing a POA. In other words, many people create a POA specifically to ensure that their Agent named in the POA has the authority to act on their behalf if they suffer a period of incapacity. That doesn’t work, however, if the POA terminates upon the incapacity of the Principal. To resolve this problem, the concept of a “durable” POA evolved. When a POA is made durable it simply means that the Agent’s authority survives the incapacity of the Principal.
Springing Power of Attorney
Another aspect of a Power of Attorney to understand is a Springing POA. Both a general and a limited POA can be a Springing POA. A Springing POA has special language in it that causes the Agent’s authority to “spring” into action at a specific time or upon the occurrence of a specific event. For example, you might create a general POA that does not actually go into effect unless you have been missing for more than 48 hours or until you have been declared incapacitated by one or two physician(s).
Power of Attorney for Health Care
One of the limits placed on a general POA is the authority of the Agent to make health care decisions for the Principal. If you want to give someone this authority you need to execute a Durable Health Care Power of Attorney. A Durable Health Care POA is a type of advanced directive that allows you to appoint an Agent to make health care decisions for you if you lack the ability to understand the nature and consequences of your health care decisions or the ability to make and communicate your health care decisions yourself.
It is also recommended that you execute a Mental Health Care Power of Attorney, Living Will and Health Insurance Portability and Accountability Act (HIPPA) form to allow those you trust to have access to your medical information and ensure your wishes are carried out.
Contact Estate Planning Attorneys at Morris Hall PLLC
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about a Power of Attorney or other estate planning related questions, contact the experienced Phoenix estate planning attorneys at Morris Hall PLLC by calling 602-249-1328 to schedule your appointment today.
- Arizona Inheritance Law — Children Born to Unmarried Parents - September 28, 2021
- Estate Planning 101 Wills vs Trusts - January 15, 2021
- Tax Planning for 2021 - January 12, 2021