What is a Power of Attorney?
It is often convenient - or even necessary - to have someone else act for you. You can give someone the legal authority to act for you with a document called a Power of Attorney. If you give a Power of Attorney, you are called the principal and the person you give it to is called the agent or the attorney-in-fact.
A paper giving a Power of Attorney should be clear and understandable. It should give only those powers you want to give. The powers given may be very limited or very broad.
What kinds of things may I authorize an agent to do?
Many things that people do may be done through agents. You may authorize an agent to:
- buy or sell things for you;
- apply for public benefits (such as Medicaid, Medicare, or Social Security) for you;
- manage your business;
- collect your debts;
- invest your money;
- cash your checks;
- manage your financial matters generally; or
- sue on your behalf.
You must specify in the Power of Attorney document what powers you are giving to your agent and when those powers are to take effect.
Must each power that is given be specifically mentioned in the paper?
Broad language giving an agent "all powers" to manage your financial affairs or make health care decisions may be enough for many purposes. But some powers are given only if they are specifically mentioned. Those requiring specific mention include:
- the power to make gifts of your money or other property;
- the power to change your community property agreement; and
- the power to designate beneficiaries of your insurance policies.
Some powers cannot be given to an agent. Those include:
- the power to vote in public elections; and
- the power to make or alter a Will.
Specifically authorized powers may be especially important for married people concerned about what would happen if one spouse became ill and needed nursing home care or other long-term care. Authority to transfer property from the disabled spouse to the healthy spouse may be important for Medicaid eligibility purposes.
On the other hand, giving an agent broad powers to make gifts of you property may result in serious problems if the agent turns out to be untrustworthy or unwise. You should speak with a lawyer if you have questions about these issues.
When does a Power of Attorney take effect and how long does it last?
- A Power of Attorney can be written to take effect immediately upon signing or to take effect at some time in the future.
- The future time may be a specific date or may be defined by the occurrence of some event -- for example, a decision by your doctor that you are unable to make decisions on your own.
- A Power of Attorney can be written to last either for a limited period of time or indefinitely.
- Your Power of Attorney ends when you die. It is not a substitute for a will.
What is a Durable Power of Attorney?
Unless your Power of Attorney specifically says otherwise, your agent's power ends if you become mentally incapacitated. However, a Power of Attorney may say that it is to remain in effect even if you become disabled or incapacitated. A Power of Attorneythat says this is called a Durable Power of Attorney.
Durable Powers of Attorney can be written to cover two situations:
- You want the agent to have authority only if you become unable to act for yourself; or
- You want the Power of Attorney to take effect immediately and to continue in effect if you become incapacitated.
Can a Durable Power of Attorney be used to allow an agent to make health care decisions?
Yes. See the article entitled "Frequently Asked Questions About Durable Powers of Attorney for Health Care" for more information on using a Durable Power of Attorney to plan your future health care. It is often more convenient to have two separate Powers of Attorney -- one for financial duties and one for health care decisions.
Is a Durable Power of Attorney an alternative to a guardianship?
A Durable Power of Attorney is an alternative to guardianship only if it is given before you become mentally incapacitated. To give a Power of Attorney, you must have the mental capacity to understand what you are doing. Once you have lost that capacity, it is too late for you to give a Power of Attorney. At that point, a court will have to appoint a guardian or conservator for you, if there is a need.
Are there risks involved in giving someone a Power of Attorney?
Yes. With a Power of Attorney, an agent is often entrusted with important decisions, and the agent may have access to some or all of your property. If the agent is not trustworthy, serious problems can result. For example, if the agent is dishonest and runs away with your money, it may be difficult or impossible to get the money back.
Also, you will ordinarily be bound by your agent's acts (even foolish acts) and will be responsible for your agent's negligence while the agent is acting for you. For example, if an agent is authorized to manage your financial affairs and signs a contract to purchase something on your behalf, you will ordinarily have to pay for it, like it or not.
It is obviously important to choose a trustworthy agent. You should also consider carefully which powers to give the agent.
What rules should govern an agent's judgment in making decisions for you?
Your agent must act in accordance with your wishes as long as you have the mental capacity to make your own decisions.
If you lose that capacity, your agent should attempt to do what you would have wished if you still had the capacity to act.
For example, if your agent knows that when you were fully competent you were always opposed to investment in a certain company, then the agent should not invest in that company on your behalf.
An agent who cannot determine what you would have wanted is required do what he or she believes to be in your best interests.
Can I continue to act independently after giving a Power of Attorney?
Yes. Giving someone a Power of Attorney does not prevent you from making decisions or conducting business for yourself. If you and the agent disagree, your decision governs. (This assumes the decisions are announced at the same time. If an agent has decided to sell an item of property and has sold it, your later announcement that you do not want to sell it doesn't undo the sale.) If the agent does not respect your wishes, you should revoke the Power of Attorney.
A problem may arise if an agent with a Durable Power of Attorney believes you now lack the mental capacity to act independently or to cancel the Power of Attorney, but you disagree. In such a case, the agent may file a guardianship proceeding and ask a court to determine whether you are mentally incapacitated.
Can Powers of Attorney be given to more than one agent at the same time?
Yes. You can give Powers of Attorney to two or more people at the same time, or you can name a second agent to take over under specified circumstances (such as the death of the first agent).
But before giving Powers of Attorney to more than one person at the same time, it is worth considering whether confusion or conflict is likely to result. It is probably wise to discuss the potential advantages and disadvantages (and ways to address the disadvantages) with a lawyer before giving Powers of Attorney to more than one person.
Must a Power of Attorney be notarized or recorded?
Sometimes. If you want to give an agent the power to sell land, or to transfer or encumber title to land in some other way, the Power of Attorney must be signed in front of a notary, who must note that you signed it voluntarily for the purposes mentioned in it. The Power of Attorney must also have the following language in bold type at the top of the first page:
THIS POWER OF ATTORNEY AUTHORIZES THE PERSON NAMED BELOW AS MY ATTORNEY-IN-FACT TO DO ONE OR MORE OF THE FOLLOWING: TO SELL, LEASE, GRANT, ENCUMBER, RELEASE OR OTHERWISE CONVEY ANY INTEREST IN MY REAL PROPERTY AND TO EXECUTE DEEDS AND ALL OTHER INSTRUMENTS ON MY BEHALF, UNLESS THIS POWER OF ATTORNEY IS OTHERWISE LIMITED HEREIN TO SPECIFIC REAL PROPERTY.
If you are using the Power of Attorney for a real estate transaction, it must be recorded in the office of the Recorder of Deeds before or at the same time as the deed to the property being bought or sold. A copy of the Power of Attorney will be made for the public record, and the original will be returned to the person submitting it.
If no land is going to be dealt with, it is not legally necessary to sign a Power of Attorney in front of a notary or to have it recorded, but notarization may still be wise. Some institutions or individuals may doubt the validity of a Power of Attorney that has not been notarized and may refuse to honor it.
Can a Power of Attorney be canceled?
Yes. This is called revoking the Power of Attorney. To revoke a Power of Attorney, you should give a signed written notice to the agent and, if possible, to anyone who has been relying on the Power of Attorney.
If the Power of Attorney has been recorded for the purpose of allowing an agent to buy or sell real estate for you, you should also record the signed written notice revoking the Power of Attorney in the office of the Recorder of Deeds. The notice should include the instrument number and date of the original recorded Power of Attorney.
Is there court supervision of a Power of Attorney?
Ordinarily, an agent with a Power of Attorney acts without any court supervision. However, a court can be asked to consider certain issues relating to a Power of Attorney. The request can be made by you, the agent, or certain other interested individuals. A court may, for example, decide whether a third person must honor a Power of Attorney, it may order an agent to give an accounting to you or to a third party, or it may interpret or modify the Power of Attorney or remove the agent.
Do I need a lawyer to prepare a Power of Attorney?
There is no legal requirement that a Power of Attorney be prepared or reviewed by a lawyer. However, if you are going to give important powers to an agent, it is wise to get individual legal advice before signing a complicated form. A person who signs a Power of Attorney without fully understanding what it means, and without considering risks and alternatives, is asking for trouble.
Where can I get individual legal advice about Powers of Attorney?
Click here for a list of legal service agencies that may be able to help you. If you do not qualify for free legal assistance, lawyers who work with wills and probate, or who refer to their area of practice as "elder law" should be knowledgeable about Powers of Attorney.
Is there a form I can use to give a Power of Attorney?
WARNING: While it is possible to fill in the blanks and use these forms, they may not be appropriate for your individual situation. It is best to have a Power of Attorneytailored to your individual needs. It should give only those powers you want to give, and should go into effect only under the conditions in which you want it to. If you do not understand anything in the form below, you should speak with a lawyer before signing it.
Click here for a sample Power of Attorney form.