Some information to consider if your loved one is thinking about signing a power of attorney document.
Note: The powers of attorney discussed in this article pertain only to certain financial and legal decisions. They should not be confused with healthcare powers of attorney, which are covered in the “Advance Medical Directives” section of our library.
There are two general types of powers of attorney in which multiple or general powers can be granted to the attorney-in-fact. These include the durable power of attorney and regular power of attorney. You should note that all states have slightly different regulations that must be followed for a power of attorney document to be valid. Be sure to check with your loved one’s state to find out about specific regulations.
Regular Powers Of Attorney
Regular powers of attorney end in cases of incompetency or incapacitation. This type of power of attorney makes sense for many commercial and financial situations
Durable Powers Of Attorney
Durable powers of attorney are effective even in cases of incapacitation. Generally, the document must state whether it remains or becomes effective after incapacitation. If the power of attorney document is written so that it becomes effective after incapacitation, it will become effective immediately after it is signed and the named attorney-in-fact swears in an affidavit that the principal is incapacitated. Therefore, it is a good idea to define incapacitation very clearly in the document. In cases of incapacitation, most states consider the document to be valid only when it is registered in the office of the register of deeds in one of the following places:
- The county named in the document
- The county of your loved one’s legal residence
- A county where your loved one owns real property
- The county where the attorney-in-fact lives
The durable power of attorney makes the most sense in many caregiving situations, especially if a loved one’s age, illness, or disability could lead to incompetency or incapacitation.
Rights And Responsibilities
Both types of power of attorney documents allow the attorney-in-fact (you) to act on behalf of the principal (your loved one) to:
- Buy and/or sell property
- Buy, manage, or sell real estate
- Disclaim interests to avoid estate taxes
- Employ professional assistance
- Enter into contracts
- Enter safety deposit boxes
- Exercise stock rights
- File tax returns
- Handle banking transactions
- Handle matters related to government benefits
- Handle transactions involving securities
- Maintain and operate business interests
- Make gifts
- Make transfers to revocable trusts
- Purchase life insurance
- Settle claims
Because the power of attorney document can be used to grant a large amount of the principal’s decision-making power to the attorney-in fact, individuals should be careful when creating and interpreting the conditions set forth in these documents. If necessary, the principal should include any desired restrictive clauses in the power of attorney document.
In contrast, it is important to recognize the value of being able to assign these decision capabilities to a trusted family member or friend, especially in the case of durable powers of attorney that continue to be legally binding in cases of incapacity. These documents can save caregiving family members and friends a great deal of time and frustration. For this reason, every individual should at least look into establishing a power of attorney.
© Copyright FamilyCare America, Inc. All Rights Reserved.