A Power of Attorney - It's Uses and Requirements
A power of attorney permits an individual to appoint another person or organization to take control of his/her affairs should he/she become unavailable or unable to care for himself. The person or organization becomes their "agent" or "attorney-in-fact."
There are a variety of reasons for a power of attorney to be created.
A General Power of Attorney gives the agent extensive powers over the affairs of the person named, usually these include:
- Taking care of banking transactions, entering safety deposit boxes and bill paying
- Handling transactions involving U.S. securities
- Ability to buy or sell property and stocks
- Permission to purchase life insurance
- Settling any claims on an estate
- Entering into contracts on behalf of the individual
- Managing, buying or selling real estate
- Filing and signing tax returns
- Caring for matters regarding government benefits
- Managing business interests and caring for business operation
- Employing professional assistance on behalf of the individual
- Making transfers to revocable "living" trusts
- Using such strategies as disclaiming interests to avoid estate taxes
A General Power of Attorney allows an agent to handle the affairs of an individual when he is unable to do so: traveling out of the state or country, or when physically or mentally unable to handle his own affairs. This document is often included as part of an estate plan ensuring an individual's financial necessities may be cared for if he becomes unable to do so.
A Special Power of Attorney bestows only certain specified powers to the named agent. An agent could be given the authority to sell a car or house for an individual who has moved away. Individuals often use a special power of attorney to authorize their agent to carry out one or more of the following:
A Health Care Power of Attorney designates an agent who will have the authority to make health decisions for an individual who is unconscious, mentally incompetent, or otherwise unable to make those decisions. It may also include his wishes regarding "life-sustaining procedures" if he becomes permanently comatose or terminally ill. Even if such information is included in the Health Care Power of Attorney, the person drafting the document should still discuss his wishes, preferences and values with his assigned agent.
A Durable Power of Attorney can be any of the above documents which contain a special durability provision. If the one signing the power of attorney becomes mentally incompetent while the document is in effect, the durability proviso allows that document to remain in effect. Signing a Durable Power of Attorney prepares a person for the possibility of becoming mentally incompetent due to accident or illness.
The agent chosen neednít be a lawyer, but should be a trusted relative or friend. The agent will act on the individualís behalf regarding financial or health issues, or both. The agent should be someone trusted not to abuse the powers conferred on him, to look out for the signers best interests.
An agent will only be held responsible for intentional misconduct, not for doing something wrong due to lack of knowledge. This encourages the person chosen to accept the responsibility of an agent. Usually there is no financial incentive to serve as an agent. Successor agents may be specified in the event that the initial agent can't or won't serve that role. A successor agent may then take over those responsibilities.
Any power of attorney must be signed by the person granting the authority while he is mentally competent for the document to be legally binding. A doctor may be asked to certify in writing that the person understands the document and the consequences of signing. A power of attorney should also be notarized which makes it harder for someone to challenge the validity of the signature. This also allows the document to be recorded for use with real estate transactions.
While the individual who appointed the power of attorney is competent, the document may be revoked or remade at any time.