Powers of Attorney: The BasicsSubmitted by Bernhardt Wealth Management on February 11th, 2019
Many of us associate the use of a power of attorney (POA) with someone who is incapacitated and unable to make decisions or take actions on their own behalf. That is certainly a situation where a power of attorney would be applicable, but there are many others. A POA can actually be a very versatile document that can cover a wide variety of situations, not all of which involve dire medical conditions or compromised mental capacity. Here are a few basic facts that you can use to decide if a POA might be a good solution for your situation.
There are two basic types of POAs: limited and general. A limited power of attorney is designed to cover only specific situations. For example, if an unavoidable trip would cause you to miss a real estate closing, you could grant a limited power of attorney to a trusted individual. That person could then attend the closing on your behalf, and their signature and decisions would have the same legal force as your own. The POA could be drawn such that it extended these powers only to that specific real estate transaction and nothing else. By the way, I created a limited power of attorney when I had my home on the market in 2018 while I was walking on the Camino de Santiago (otherwise known as The French Way).
A general power of attorney, as the name implies, is much more far-reaching. It typically gives someone the same legal capabilities as you have, including the right to execute transactions, sign checks, and make other legally binding decisions on your behalf. Such POAs are often employed in a situation where the person granting the general power of attorney is either temporarily or permanently unable to carry on their own affairs. A durable power of attorney is one designed to remain in force during the mental incapacity of the grantor, as certified by a physician.
POAs involve two parties: the grantor—the person giving the authority to another individual—and the attorney-in-fact, or agent—the person entrusted with exercising the authority granted by the power of attorney. Despite its sound, the attorney-in-fact or agent does not have to be either a lawyer or an agent in any specialized sense. They only need to be someone who is trusted by the grantor to follow the terms of the POA in a way consistent with the grantor’s wishes.
All powers of attorney have certain limitations. For example, a power of attorney to act on someone else’s behalf must be granted when the grantor is of sound mind. If the POA is invoked because of the grantor’s incapacity, it may be revoked by the grantor if the grantor regains the ability to make their own decisions and that return to mental capacity is endorsed by a physician. A grantor who is of sound mind may terminate a POA by notifying the agent that the agreement is revoked. Powers of attorney do not survive the death of the grantor; when a grantor dies, the agent’s authority is terminated in favor of whatever provisions govern the disposition of the deceased grantor’s estate.
If you are considering the use of a POA, you should consult with an attorney who is familiar with the laws governing POAs in your state. These laws vary, and it’s important to know any limitations on the use of a POA that your state might impose.