A Power of Attorney (POA) is a legal document that authorizes someone to act on your behalf. This person is known as your agent or attorney-in-fact. Powers and duties can vary, depending on the type of POA you create. In this blog post, we will provide an overview of the different types of POAs and their respective powers and duties.
Some common examples of situations where a Power of Attorney may be used include:
- Signing real estate documents on your behalf;
- Accessing your bank accounts;
- Managing investments on your behalf;
- Filing taxes on your behalf; or
- Paying bills on your behalf.
Types of Power of Attorney
There are two types of power of attorney: general and limited.
General Power of Attorney:
A General Power of Attorney (GPA) authorizes someone to handle all legal and financial matters on your behalf. This type of power is often used when someone is going to be out of the country for an extended period of time or is unable to handle their affairs due to illness.
Limited Power of Attorney:
A Limited Power of Attorney (LPA) gives the person you designate (your “agent” or “attorney-in-fact”) authority to handle only specific tasks or make decisions about specific types of property, accounts, or transactions. You can give your agent authority to handle one transaction or many different types of transactions.
You can revoke a power of attorney at any time as long as you are mentally competent. To revoke a power of attorney, you must notify the agent and all affected parties in writing that the power of attorney is no longer effective.
One important thing to remember is that your agent is required by law to act in your best interests and follow your instructions. If you are concerned that your agent may not act according to your wishes, you can include specific instructions or limitations in the power of attorney document. You can also name more than one agent and specify whether they must act together or independently.
Other Types of Powers of Attorney
Revocable and Irrevocable Power of Attorney
Powers of Attorney can be revocable or irrevocable. A revocable Power of Attorney can be cancelled by you at any time, while an irrevocable Power of Attorney cannot be cancelled except in very limited circumstances.
There are different types of Powers of Attorney, each with its own set of rules and regulations. Here is an overview of the most common types:
Durable Power of Attorney:
This type of Power of Attorney remains in effect even if you become incapacitated. It is important to have this type of Power of Attorney in place in case something happens to you and you are unable to make decisions for yourself.
Medical Power of Attorney:
Also known as a Healthcare Proxy, this type of Power of Attorney gives the agent the authority to make medical decisions on your behalf if you are unable to do so yourself.
Financial Power of Attorney:
Gives the agent the authority to handle your financial affairs. This can include paying bills, managing investments, and filing taxes.
How to Setup a Power of Attorney
Now that you know the basics of Power of Attorney, let’s take a look at how to set one up.
The first step is to choose the type of Power of Attorney that you need. As we mentioned before, there are different types of Powers of Attorney for different situations.
Once you have decided which type you need, the next step is to choose your agent. This person should be someone that you trust to make decisions on your behalf. They should also be familiar with your financial situation and be able to handle any tasks that you assign to them.
Once you have chosen your agent, the next step is to fill out the necessary paperwork. This will vary depending on the type of Power of Attorney that you have chosen.
After the paperwork is complete, you will need to sign the document in front of a notary public.
Once the Power of Attorney is complete, you should keep it in a safe place where your agent can easily access it if they need to.
And that’s it! You have now successfully set up a Power of Attorney.
While a Power of Attorney can be a helpful tool, it’s important to remember that you are giving someone else authority over your affairs. Be sure to choose someone that you trust and who will act in your best interests.
Important Components of a Power of Attorney
Parties:
The person creating the Power of Attorney is known as the “principal.” The person whom the principal appoints to act on their behalf is known as the “agent” or “attorney-in-fact.”
Scope of Authority:
The Powers of Attorney can be either general or limited in scope. A General Power of Attorney gives the agent broad powers to manage the principal’s property and affairs. A Limited Power of Attorney is more limited in scope and only allows the agent to act on behalf of the principal in specific situations that are authorized by the principal.
Duration:
A Power of Attorney can be either revocable or irrevocable. A Revocable Power of Attorney can be cancelled by the principal at any time. An Irrevocable Power of Attorney cannot be revoked except in very limited circumstances.
Powers and Duties:
The agent appointed by the Power of Attorney has certain powers and duties. These vary depending on the type of Power of Attorney and the scope of authority granted by the principal. Generally, the agent has a duty to act in the best interests of the principal and to exercise reasonable care when handling the affairs of the principal.
Notarization:
Most Powers of Attorney require notarization in order to be valid. This simply means that the document must be signed by a notary public in order to be legally binding.
State Laws:
Powers of Attorney are governed by state law. It is important to familiarize yourself with the laws in your state before creating a Power of Attorney.
Filing a Power of Attorney
Once you have created your Power of Attorney, you may need to file it with a government office or financial institution. This is not required in all cases, but it is advisable to do so. Filing a Power of Attorney ensures that your agent will be able to act on your behalf without any problems.
If you need to file your Power of Attorney, you can usually do so by mail or in person. The requirements for filing vary depending on the state in which you live, so be sure to check with your local office.
Factors to consider when Issuing a Power of Attorney
As we mentioned before, a Power of Attorney can be a helpful tool in managing your affairs. However, there are some important factors to consider before issuing one.
Trustworthiness:
The most important factor to consider when issuing a Power of Attorney is trustworthiness. You are giving someone else authority over your affairs, so it is important to choose someone that you trust implicitly.
Reliability:
It is also important to choose an agent who is reliable and who will act in your best interests. This person should be someone that you can count on to follow your instructions and handle your affairs in a responsible manner.
Familiarity:
Your agent does not need to be an expert on your finances, but they should at least have a general understanding of your financial situation. This will allow them to make informed decisions on your behalf.
Ability to Handle Responsibility:
Issuing a Power of Attorney is a big responsibility. Be sure to choose an agent who is up to the task and who will take their duties seriously.
Communication Skills:
It is also important to choose an agent with good communication skills. This person will need to communicate with your financial institutions, government offices, and other individuals on your behalf. They should be able to do so in a clear and concise manner.
Multiple Agents in a Power of Attorney
You may also choose to appoint more than one agent in your Power of Attorney. This can be helpful if you have multiple properties or accounts that need to be managed. It can also provide a backup in case your primary agent is unavailable.
If you do appoint more than one agent, you will need to specify how they are to act. You can either allow them to act independently or require them to act together (known as co-agents).
Independent agents can make decisions without consulting with each other. This can be helpful if you have different types of property or accounts that need to be managed. However, it is important to note that independent agents will not be liable for the actions of the other agent.
Co-agents, on the other hand, must consult with each other before making any decisions. This can be helpful if you want to ensure that all decisions are made jointly. However, it is important to note that co-agents will be liable for the actions of the other agent.
You should also specify what happens if one of your agents is unable or unwilling to act on your behalf. You can either appoint a successor agent or allow the remaining agent to continue acting independently.
Successor Agents
A successor agent is someone who takes over for your primary agent if they are unable or unwilling to act on your behalf. This can be helpful if you have a specific person in mind who you would like to take over for your primary agent.
Allowing the Remaining Agent to Act Independently. If you do not appoint a successor agent, the remaining agent will be able to continue acting on your behalf. This can be helpful if you trust the remaining agent and want them to have the authority to act independently.
Making Your Power of Attorney Revocable or Irrevocable
A revocable Power of Attorney can be canceled at any time by the person who issued it (known as the principal). An irrevocable Power of Attorney cannot be canceled except in very limited circumstances.
Reasons for Making a Power of Attorney Revocable
There are many reasons why someone might make their Power of Attorney revocable. The most common reason is that the principal wants to retain control over their affairs. This allows the principal to cancel the Power of Attorney if they are unhappy with how their agent is handling their affairs.
Another common reason for making a Power of Attorney revocable is to protect the principal from fraud. If the principal later discovers that the agent has been engaging in fraudulent activities, they can cancel the Power of Attorney to prevent the agent from continuing to act on their behalf.
Reasons for Making a Power of Attorney Irrevocable
There are also many reasons why someone might make their Power of Attorney irrevocable.
- The most common reason is to ensure that the agent will have authority to act even if the principal becomes incapacitated. This can be helpful if the principal wants to ensure that their affairs will be handled in a certain way even if they are unable to communicate their wishes.
- Another common reason for making a Power of Attorney irrevocable is to protect the agent from liability. If the agent knows that the Power of Attorney cannot be revoked, they may be more likely to act in good faith and exercise reasonable care when handling the principal’s affairs.
Making Your Power of Attorney Durable or Nondurable
A durable Power of Attorney remains in effect even if the principal becomes incapacitated. A nondurable Power of Attorney ceases to be effective if the principal becomes incapacitated.
Reasons for Making a Power of Attorney Durable
The most common reason for making a Power of Attorney durable is to ensure that the agent will have authority to act even if the principal becomes incapacitated. This can be helpful if the principal wants to ensure that their affairs will be handled in a certain way even if they are unable to communicate their wishes.
Another common reason for making a Power of Attorney durable is to protect the agent from liability. If the agent knows that the Power of Attorney will remain in effect even if the principal becomes incapacitated, they may be more likely to act in good faith and exercise reasonable care when handling the principal’s affairs.
Reasons for Making a Power of Attorney Nondurable
There are also many reasons why someone might make their Power of Attorney nondurable. The most common reason is to ensure that the agent’s authority will cease if the principal becomes incapacitated. This can be helpful if the principal does not want the agent to have authority to act on their behalf if they are unable to communicate their wishes.
Another common reason for making a Power of Attorney nondurable is to protect the principal from fraud. If the principal later discovers that the agent has been engaging in fraudulent activities, they can revoke the Power of Attorney to prevent the agent from continuing to act on their behalf.
When Should You Make a Power of Attorney?
You should make a Power of Attorney whenever you want someone else to have authority to act on your behalf. This could be for a specific purpose, such as handling a real estate transaction, or it could be for general purposes, such as managing your financial affairs.
You should also make a Power of Attorney if you want to ensure that your affairs will be handled in a certain way even if you become incapacitated. This can be helpful if you have specific instructions that you want followed or if you want to designate someone to make decisions on your behalf.
Risks Associated to Power of Attorneys
There are a few risks associated to appointing someone as your Power of Attorney. These include:
Theft or loss of the document:
if you appoint someone as your Power of Attorney, they will be in control of your finances and assets. If they lose the document or it is stolen, there is a risk that your finances could be taken advantage of.
Abuse of power:
there is always the potential for abuse when one person has complete control over another person’s finances. If you are concerned about this, you can appoint more than one person as your Power of Attorney, or put limits on what they are able to do with your money.
Changing their mind:
if the person you appoint as your Power of Attorney changes their mind, they can revoke the document at any time. This could leave you in a difficult situation if you are unable to make financial decisions for yourself.
Advantages of Power of Attorneys
There are also some advantages to appointing a Power of Attorney. These include:
Peace of mind:
if you know that there is someone you trust who can make financial decisions on your behalf, it can give you peace of mind, especially if you become ill or injured and are unable to make decisions for yourself.
Flexibility:
a Power of Attorney can be very flexible, and you can appoint more than one person, or put limits on what they are able to do. This means that you can tailor the arrangement to suit your needs.
Time-saving:
if you have a Power of Attorney in place, it can save a lot of time and hassle if you become ill or injured and are unable to make decisions for yourself.
The person you appoint will be able to take care of everything for you, so you don’t have to worry about it.
Cheaper and easier than other options:
a Power of Attorney is usually cheaper and easier to set up than other options, such as a trust. It can also be revoked or changed at any time, which gives you more control over your finances.
How to Revoke a Power of Attorney
Revocation on Notice:
You may revoke your power of attorney by giving written notice to the agent.
The revocation will become effective when the agent receives notice. You should give notice to the agent in a way that will allow you to prove that the agent received it. For example, you might send the notice by certified mail or have someone else hand-deliver it and then get a receipt from the agent.
If possible, you should also notify anyone who is relying on your power of attorney of your revocation.
Revocation if Agent Breaches Fiduciary Duty:
If your agent breaches his or her fiduciary duty to you, you may be able to revoke the power of attorney without giving any advance notice to the agent. A court may also revoke the agent’s authority if it finds that the agent breached his or her fiduciary duty.
You May Need to File a Revocation with the Court:
If your agent has already taken action on your behalf under the power of attorney, you may need to file a revocation with the court to stop him or her from taking any further action. For example, if your agent has sold your house without your permission, you would need to file a revocation with the court and notify all parties involved in the sale of your house of the revocation.
Change in Circumstances:
You may also revoke your power of attorney if there is a change in circumstances that makes it no longer desirable for the agent to have authority to act on your behalf. For example, if you made the power of attorney because of an illness or injury and you have since recovered, you may want to revoke the power of attorney.
Lapse of Time:
A power of attorney may also be automatically revoked if it is for a specific period of time and that time period has lapsed. For example, if you made a power of attorney to give your agent authority to sell your house and the power of attorney specifically said that it would expire one year from the date it was signed, the power of attorney would be automatically revoked after one year.
Operation of Law:
A power of attorney may also be revoked by operation of law. This means that the power of attorney is no longer valid because of a change in the law or because of a court order. For example, if the state legislature passes a law revoking all powers of attorney that were made before a certain date, then all powers of attorney that were made before that date would be automatically revoked.
Conclusion:
A power of attorney is a legal document that gives someone else the authority to act on your behalf. It can be very flexible, and you can appoint more than one person, or put limits on what they are able to do.
A power of attorney is usually cheaper and easier to set up than other options, such as a trust. It can also be revoked or changed at any time, which gives you more control over your finances. You may revoke your power of attorney by giving written notice to the agent, and the revocation will become effective when the agent receives notice. If your agent breaches his or her fiduciary duty to you, you may be able to revoke the power of attorney without giving any advance notice to the agent.