Powers of Attorney
A Power of Attorney (POA) is a crucial legal document in estate planning that allows you to appoint someone, known as an agent or attorney-in-fact, to act on your behalf in personal, business, or other legal matters. The authority granted can be broad or limited and can take effect immediately or upon a certain event, such as your incapacitation.
→ What is a Power of Attorney (POA) and why is it important?
A Power of Attorney is a legal document that allows you to appoint someone else, known as your agent or attorney-in-fact, to manage your financial, legal, or health care matters if you're unable to do so yourself. This could be due to physical absence, illness, or mental incapacity. A POA is important because it ensures that your affairs will be taken care of according to your wishes even if you're not able to manage them yourself.
→ What types of decisions can a POA cover?
A POA can cover a wide range of decisions depending on your needs. This can include financial decisions such as managing your bank accounts, paying your bills, buying or selling property, investing your money, and handling tax returns. It can also cover personal decisions like arranging for medical care or deciding where you live. Some POAs can also cover business decisions if you own a business.
→ Can a POA be used to handle my affairs after I die?
No, a POA cannot be used after death. The authority of your agent ends immediately upon your death. After death, the executor of your will or the administrator of your estate takes over to handle your affairs.
→ Can a POA be used if I become mentally incapacitated?
Yes, but only if it's a specific type of POA known as a Durable Power of Attorney. Ordinary POAs become ineffective if the principal becomes mentally incapacitated. However, a Durable Power of Attorney remains in effect or comes into effect upon your mental incapacity, allowing your agent to continue managing your affairs.
→ Can I have more than one POA?
Yes, you can have more than one POA. You might have one POA for financial matters and another for healthcare decisions (often known as a Healthcare Power of Attorney). You can also appoint different agents for different matters or have multiple agents who must act jointly.
→ Can a POA be revoked?
Yes, a POA can be revoked at any time as long as you're mentally competent. The revocation should ideally be in writing, and you should inform your agent and any institutions or people that the agent has been dealing with. It's also good practice to destroy all copies of the revoked POA.
Appointing Agents
When appointing an agent, consider their trustworthiness, reliability, and ability to handle the responsibilities granted to them. The agent could be a trusted family member, friend, or professional such as a lawyer or accountant. It is also wise to appoint an alternate agent in case the primary agent is unable or unwilling to act.
→ Who can I appoint as my agent?
You can appoint any competent adult as your agent, typically a trusted friend or family member. You could also appoint a professional, such as a lawyer or accountant, particularly if your affairs are complex. The key is choosing someone who is reliable, trustworthy, and capable of handling the responsibilities you are delegating.
→ Can I appoint multiple agents?
Yes, you can appoint more than one person as your agent. If you choose to do this, you'll need to specify whether they must act together (jointly) or can act separately (severally). Joint appointments provide a check-and-balance mechanism but can be impractical if the agents do not live close to each other. Several appointments offer more flexibility but can lead to confusion or disputes if the agents disagree.
→ What responsibilities does an agent have?
An agent's responsibilities depend on what powers you grant them. This can range from managing your finances, selling property, running a business, or making medical decisions. An agent is expected to act in your best interest, maintain accurate records, keep your affairs separate from theirs, and avoid conflicts of interest.
→ What can an agent do with a POA?
With a POA, an agent can carry out any actions specified in the document. This can include paying bills, managing investments, buying or selling real estate, applying for benefits, making healthcare decisions, and more. However, an agent cannot change your will, transfer the POA to someone else, or make decisions after your death unless specifically allowed in the POA.
→ Can an agent refuse to act under a POA?
Yes, an agent can refuse to act under a POA. Acting as an agent can be time-consuming and stressful, and the agent might not feel capable of carrying out the duties effectively. This is why it's important to discuss your intentions with your chosen agent before appointing them and to name an alternate agent in case your first choice is unable or unwilling to serve.
→ Can an agent be held liable for their actions?
An agent can be held liable if they misuse their power, fail to act in your best interest, or do not fulfill their responsibilities properly. This is known as a breach of fiduciary duty. If an agent acts outside the scope of the authority granted by the POA, those actions might not be legally valid, and the agent could be held responsible for any resulting damages.
Immediate vs. Springing
An immediate POA takes effect as soon as it's signed and remains effective until it's revoked or until death. It's useful if you're planning to be out of the country and need someone to handle your affairs. A springing POA, on the other hand, only takes effect upon a specified event, typically your incapacity. It ensures you maintain control over your affairs unless you're unable to do so.
→ What is the difference between an immediate and springing POA?
An immediate Power of Attorney becomes effective as soon as it is signed and remains in effect until it is revoked or until the principal dies. It allows the agent to act on the principal's behalf immediately, even if the principal is still capable of handling their affairs. A springing Power of Attorney, however, only comes into effect upon the occurrence of a specific event, typically when the principal becomes incapacitated.
→ Can I choose when my POA takes effect?
Yes, you can specify when your POA takes effect. If you want it to take effect immediately, you can set up an immediate POA. If you prefer it to take effect only when you are unable to manage your affairs, you would set up a springing POA. The latter often requires a certification from a physician stating that you are incapacitated.
→ What happens if I become incapacitated and I only have an immediate POA?
An immediate POA remains in effect even if you become incapacitated unless it's specifically stated in the document that it does not. However, if you want your POA to remain in effect or become effective only upon your incapacitation, you should consider setting up a Durable Power of Attorney. This type of POA is designed to survive the incapacity of the principal.
→ Can a springing POA take effect under circumstances other than incapacity?
Yes, a springing POA can be designed to take effect under different circumstances as specified in the document. While incapacity is the most common event that triggers a springing POA, other events could include the principal being out of the country and unable to handle their affairs or upon a certain date or occurrence of a specific event.
→ How is 'incapacity' determined for a springing POA?
Incapacity is typically determined by a licensed physician who examines the principal and certifies in writing that the principal is incapable of managing their financial affairs. The criteria for incapacity may be defined in the POA document itself. It's important to ensure the springing POA clearly outlines the process for determining incapacity to avoid potential disputes or delays.
→ Can I have both an immediate and a springing POA?
Yes, you can have both an immediate and a springing POA, but they would typically be for different purposes. For example, you may have an immediate POA for your business operations and a springing POA for your personal finances to take effect only if you become incapacitated. It's crucial to clearly outline the powers and when they take effect in each document to avoid overlap or confusion. It's advisable to consult with an attorney to ensure your POAs are set up correctly.
Durable Power of Attorney
A Durable Power of Attorney remains in effect or takes effect if you become mentally incapacitated. A durable POA ensures your agent can manage your affairs without having to go through court proceedings to be appointed as your guardian or conservator.
→ What is a Durable Power of Attorney?
A Durable Power of Attorney (DPOA) is a legal document that allows you to appoint someone, referred to as your agent or attorney-in-fact, to manage your affairs if you become mentally incapacitated. Unlike a regular power of attorney that becomes invalid when you're mentally incapacitated, a DPOA continues to be effective, ensuring that your finances and other matters are appropriately handled.
→ Why would I need a Durable Power of Attorney if I already have a regular POA?
A regular Power of Attorney (POA) becomes ineffective once you become mentally incapacitated. This means that if you suffer from an accident, disease, or other events leading to mental incapacity, your agent cannot make decisions on your behalf under a regular POA. On the other hand, a Durable Power of Attorney remains effective even if you're incapacitated, allowing your agent to continue managing your affairs without interruption.
→ What happens if I don't have a Durable Power of Attorney and I become incapacitated?
If you become incapacitated without a Durable Power of Attorney in place, your family might have to go through a potentially lengthy and costly court process to have a guardian or conservator appointed to manage your affairs. This process can add stress during an already difficult time. Having a DPOA in place ensures that someone you trust can step in immediately to handle your affairs.
→ Can a Durable Power of Attorney be revoked?
Yes, a Durable Power of Attorney can be revoked, but you must be mentally competent to do so. The revocation should be done in writing and delivered to the agent, and any third parties with which the agent has been dealing (e.g., your bank). It's also advisable to destroy any copies of the revoked DPOA.
→ Can a Durable Power of Attorney be used after death?
No, a Durable Power of Attorney cannot be used after death. The authority of the agent ends when the principal (the person who created the DPOA) dies. The management of your affairs after death is typically handled by the executor or personal representative named in your will or by a trustee if you have a trust.
→ Does a Durable Power of Attorney need to be notarized?
Yes, typically a Durable Power of Attorney needs to be notarized to be legally valid. The requirements can vary by state, so it's important to check your state's laws or consult with an attorney to ensure your DPOA is properly executed. Some states may also require the DPOA to be witnessed.
Revoking Powers of Attorney
A POA can be revoked at any time as long as you're mentally competent. Revocation should be done in writing and provided to the agent and any entities with which the agent has been dealing. It's also a good idea to destroy any copies of the revoked POA. If circumstances change, such as a divorce or a falling out, revoking and creating a new POA is advisable.
→ How can I revoke a POA?
To revoke a Power of Attorney (POA), you need to provide written notice of the revocation to your appointed attorney-in-fact (the agent) and any third parties with which the agent might have interacted on your behalf. It's recommended to do this in the form of a formal, dated letter. Be sure to state clearly in the letter that you are revoking the POA effective immediately.
→ Can a POA be revoked automatically under certain circumstances?
Yes, a POA can be automatically revoked under certain circumstances. For example, if the principal (the person who issued the POA) passes away, the POA is automatically revoked. Similarly, if the POA is not durable and the principal becomes mentally incapacitated, the POA is automatically revoked. Lastly, in many jurisdictions, a POA is automatically revoked if the principal gets divorced and the ex-spouse was the agent, unless the POA document states otherwise.
→ What happens after a POA is revoked?
After a POA is revoked, the agent can no longer act on behalf of the principal. Any actions taken by the agent after the revocation could be considered illegal and the agent could be held liable. It's important for the principal to retrieve any copies of the POA from the agent and to notify all relevant third parties of the revocation to prevent any unauthorized actions by the agent.
→ Who should be notified when a POA is revoked?
When a POA is revoked, the principal should notify the agent, any alternate agents, and any third parties with which the agent might have interacted on the principal's behalf. This could include banks, investment companies, insurance companies, healthcare providers, and any other institutions or individuals who may have been relying on the POA.
→ Can an agent continue to act under a revoked POA?
No, an agent cannot continue to act under a revoked POA. If the agent continues to represent themselves as having power of attorney after it has been revoked, they could be held legally liable for their actions.
→ What happens if I revoke a POA and don't create a new one?
If you revoke a POA and don't create a new one, no one will have the legal authority to act on your behalf should you become unable to manage your own affairs. This could potentially lead to a court-appointed guardianship or conservatorship, which is often a more time-consuming, expensive, and intrusive process. Therefore, it is advisable to have a new POA in place before or soon after revoking an old one, particularly if you have ongoing or anticipated needs for an agent to act on your behalf.