Legalese Explained: Power Of Attorney

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This month’s Legal Brief focuses on the Power of Attorney. We’ll review the different Power of Attorney types, when and how they work, and their limitations.

What is a Power of Attorney?

A Power of Attorney (POA) is a document where you name a person to make decisions on your behalf if you become unable to. The document also allows you to outline specific written directions for how and when your decisions should be made. Every POA has two parties, the principal and the agent.

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The four types of Power of Attorney

There are four types of Power of Attorney that can be created. The two most common are the financial POA and medical POA, also sometimes called a medical proxy. As listed below, each POA document has different decisions they are in charge of making.  While you do not need to name two separate people for these decisions, it is recommended to allow for checks and balances.

In addition, there are two other less commonly used POA documents. The first being a limited POA, which allows the principal to grant very specific rights to what the agent can do, such as having another person separate from the financial POA to only deal with real estate or taxes. The other is called a springing POA, which only gives agents the right to make decisions if specific criteria are met. For example, a springing POA could state that the agent is only allowed to make decisions if one doctor and one specialist both state that the principal can no longer make decisions.

Further, Power of Attorneys are written as either general and durable. General POA agents have the power to make decisions only while the principal is mentally capable. The durable POA expands this time frame, allowing for the agent to makes decisions even when the principal is no longer mentally capable.

How long does an agent’s fiduciary duties last for?

Ultimately, the agent’s duties expire when the principal dies. This is the case for all Power of Attorney documents, however, there are four situations that would cause the agent’s duties to be terminated before the principal’s death.

• The principal manually removes the agent from the Power of Attorney document.
• A court finds that the agent is acting in a way that goes against the best interest of the principal or is violating the terms and conditions of the Power of Attorney document.
• A court finds that the Power of Attorney document was created fraudulently.
• A court finds that the principal was not mentally capable when the document was created.

Limitations of the agent

Generally, Agents cannot do anything that is written into the document by the principal. This presents the issue of abuse if the document is too vague. While this can be a legitimate concern, there are protections limiting what an agent can do that may be detrimental to the principal’s best interests. These protections are listed below.

• Agents cannot transfer their duties to others unless the Power of Attorney document states that they can name a new agent
• Agents cannot make decisions for the principal after death
• Agents are not allowed to work outside of the principal’s best interests
• Agents cannot invalidate or make changes to the will of the principal unless specifically authorized

While the idea of you or a loved one becoming unable to make decisions can be depressing or even intimidating, it is important to plan for what ifs. The best way to plan is to create Power of Attorney documents that specify your wishes and name trusted people to act on your behalf. It is important to make sure this document is crafted for your specific situation by a knowledgeable attorney. If you or someone you know needs help navigating the creation of a Power of Attorney, give Stone Law a call today at (877) 897-6591. Let us help you create a Power of Attorney that meets your specific needs and gives you peace of mind.