A Power of Attorney is a legal instrument that is used to delegate legal authority to another person (called an Agent or Attorney-in-Fact) to make property, financial and other legal decisions for the person who signed the power of attorney. A Power of Attorney can grant broad legal authority, or very limited authority.
A power of attorney can be a powerful estate planning tool. It is frequently used to help in the event of a person’s illness or disability, or in legal transactions where the person cannot be present to sign necessary legal documents.
Every adult should have a valid power of attorney in place so that affairs can be effectively handled should you become incapacitated, or in situations when you may not be able to act on your own behalf due to absence.
If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you. With A Power of Attorney, you choose who will act and define their authority and its limits, if any
Valid in all states, Powers of Attorney give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). It may give temporary or continuous, permanent authority to act on your behalf. A power of attorney may be revoked, but most states require written notice of revocation to the person named to act for you.
The person named in a Power of Attorney to act on your behalf is commonly referred to as your “agent” or “attorney-in-fact.” With a valid Power of Attorney, your agent can take any action permitted in the document. Often your agent must present the actual document to invoke the power.
Who Should Be Your Agent?
You may wish to choose a family member to act on your behalf. Many people name their spouses or one or more children. In naming more than one person to act as agent at the same time, be alert to the possibility that all may not be available to act when needed, or they may not agree. The designation of co-agents should indicate whether you wish to have the majority act in the absence of full availability and agreement. You should name a successor agent to address the possibility that the person you name as agent may be unavailable or unable to act when the time comes.
There are no special qualifications necessary for someone to act as an attorney-in-fact except that the person must not be a minor or otherwise incapacitated. The best choice is someone you trust.
How The Agent Should Sign?
In addition to managing your day-to-day financial affairs, your attorney-in-fact can take steps to implement your estate plan. Although an agent cannot revise your will on your behalf, some jurisdictions permit an attorney-in-fact to create or amend trusts for you during your lifetime, or to transfer your assets to trusts you created. It is prudent to include in the Power of Attorney a clear statement of whether you wish your agent to have these powers.
Gifts are an important tool for many estate plans, and your attorney-in-fact can make gifts on your behalf, subject to guidelines that you set forth in your Power of Attorney. For example, you may wish to permit your attorney-in-fact to make “annual exclusion” gifts (currently up to $10,000 in value per recipient per year) on your behalf to your children and grandchildren. It is important that the lawyer who prepares your Power of Attorney draft the document in a way that does not expose your attorney-in-fact to unintended estate tax consequences. While some states permit attorneys-in-fact to make gifts as a matter of statute, others require explicit authorization in the Power of Attorney.
. Generally, the law of the state in which you reside at the time you sign a Power of Attorney will govern the powers and actions of the agent(s) under that document.
What if I move?
Generally, a Power of Attorney that is valid when you sign it will remain valid even if you change your state of residence. Although it should not be necessary to sign a new Power of Attorney merely because you have moved to a new state, it is a good idea to take the opportunity to update your Power of Attorney.
Will my Power of Attorney expire?
Some states used to require renewal of Powers of Attorney for continuing validity. Today, most states permit a “durable” Power of Attorney that remains valid once signed until you die or revoke the document. However, you should periodically meet with your lawyer to revisit a Power of Attorney and consider whether your choice of agent still meets your needs and learn whether developments in state law affect your Power of Attorney.
Powers of Attorney for Medical Care
A power of attorney for healthcare (also called a medical directive, an advance directive, a physician’s directive, a written directive, or a durable power of attorney for healthcare) allows a person to grant another person the authority to make healthcare decisions on his or her behalf while he or she is unconscious or if he or she becomes mentally incompetent or otherwise incapacitated. A health care proxy (also called a proxy directive) is a legal document by which a person designates another person to make healthcare decisions regardless of his or her incapacity
Another estate planning tool authorized by law in many jurisdictions is a living will. A living will (also called a declaration of a desire for a natural death or a directive to physicians) allows a person who is unconscious or incapacitated to express his or her desires regarding the use of extraordinary measures to extend his or her life when there is no reasonable expectation that he or she will regain consciousness or recover.
Even if you have a legally enforceable power of attorney for healthcare, health care proxy, or living will, your should discuss fully your preferences regarding medical care with the person or persons you have designated to make healthcare decisions on your behalf.