What Is Power Of Attorney?

An introduction to powers of attorney, including explanations of legal terms, different types of power of attorney documents, and other important information.

Power of attorney is granted to an “attorney-in-fact” or “agent” to give that individual the legal authority to make decisions for an incapacitated “principal.” The laws for creating a power of attorney vary from state to state, but there are certain general guidelines to follow. Before you or a loved one signs any documents, however, be sure to consult with an attorney concerning all applicable laws and regulations.

The principal determines the amount of power given to the attorney-in-fact, and this individual can be given the authority to deal with only one particular issue (a specific power of attorney), or to handle most of the principal’s personal and financial matters (a general power of attorney). Regardless of the type of power of attorney granted, the attorney-in-fact is responsible for keeping accurate records of all transactions that he or she makes on behalf of the principal. The attorney-in-fact also is responsible for distinguishing between the types of decisions he or she has the power to make and other decisions.

There are multiple types of decisions that the attorney-in-fact can be given the power to make, including the power to:

  • Make financial decisions
  • Make gifts of money
  • Make health care decisions, including the ability to consent to giving, withholding, or stopping medical treatments, services, or diagnostic procedures. (Note: your loved one can also make a separate “health care power of attorney” to give only this power to an individual.)
  • Recommend a guardian

Normally the attorney-in-fact is paid, which means that the principal should decide on a set amount—or the method for determining a pay scale. If the principal doesn’t provide for these payments in his or her power of attorney document, the court will determine how much the attorney-in-fact will earn. The court, however, can never raise this amount above a fixed percentage of the value of the principal’s property.

The attorney-in-fact can be a spouse, adult child, relative, or trusted friend of the principal, as long as he or she acts in good faith on behalf of the principal at all times. It should be noted that the actions of an attorney-in-fact are legally considered those of the principal, so the principal should always choose a trustworthy individual. This is especially important because the power of attorney is not regulated by the court system, making it easier for the attorney-in-fact to misuse his or her power. In the document, the principal should always include restrictive language, including clauses

  • Requiring the attorney-in-fact to keep accurate and adequate records, which are to be provided on a regular basis to the principal or other named individuals
  • Prohibiting the attorney-in-fact to give gifts, or setting a limit on the amount of such gifts

Generally, not having a power of attorney document is better than having one that gives power of attorney to someone that the principal doesn’t trust. Regardless, the principal should always let another trusted individual—other than the attorney-in-fact—know where the power of attorney document (original and copies) is kept and who the attorney-in-fact is. Because incapacitating accidents are not predictable and can happen at any age, it is important to choose the right attorney-in-fact, write a clear power of attorney document, and understand the ways that the document can be challenged and terminated.

Protecting The Document

If the principal has selected an attorney-in-fact and believes that the power of attorney document may be challenged, the principal can do the following things to protect the document:

  • Make a videotape of the power of attorney statement and the principal’s intent to sign the document. Keep this video with the document. It should be noted that any behavioral or verbal quirks in this tape can be used against the power of attorney document as evidence of the principal’s incompetence.
  • Obtain a doctor’s statement at the time the power of attorney is signed regarding the principal’s state of sound mind.
  • Sign the document with multiple witnesses present regardless of state requirements. These individuals can later testify to the principal’s knowledge and voluntary signing of the document.
  • Visit a lawyer to have the document reviewed so that the lawyer can testify to the principal’s mental competency if needed.

Voiding And Termination

The power of attorney document can be voided several ways. If the document has not been registered, it can be terminated by:

  • The principal’s death
  • A termination procedure designated in the original power of attorney document
  • Destroying the document if the principal is still competent
  • Revoking the durable power of attorney by a writing document that is signed, notarized, and sent to the attorney-in-fact by certified or registered mail if the principal is still competent

If the document has been registered there are also multiple ways to terminate it, including:

  • Revoking the durable power of attorney by filing a written revocation in the register of deeds office where the original document was filed
  • The death of the principal
  • The unavailability of an attorney-in-fact
  • The principal’s divorce from the attorney-in-fact in several states, including Alabama, California, Colorado, Illinois, Indiana, Minnesota, Missouri, Pennsylvania, Texas, and Wisconsin

If the attorney-in-fact dies, and the principal has not named an alternate, the power of attorney document is also terminated. Regardless of the way that the power of attorney is revoked, the attorney-in-fact should always be notified of the termination of the document.

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