What is Power of Attorney? POA

Definition

A power of attorney is a legal document that gives a person (agent) legal rights to carry out certain actions on behalf of another person (principal).

There are a range of powers that can be put into place, examples include that your agent can handle your finances on a long-term basis, or you can limit your agent to a specific action, for example, selling your house.

Key Words

If you were putting in an application for a power of attorney, you would be known as the ‘principal’.

The person acting on your behalf, who has a power of attorney, is known as your ‘agent’ or ‘attorney-in-fact’.

Incapacitated is defined as someone who is unable to make decisions for themselves.

Who can execute a Power of Attorney?

For someone to act as a power of attorney they must be an adult and they must not be incapacitated, but these are the only conditions.

Where is a Power of Attorney helpful?

There are various situations in which a person would wish to have a power of attorney to make decisions on their behalf.

For example; where a person is disabled, elderly or in any way incapable of sufficiently caring for themselves, and therefore incapacitated, they can appoint a power of attorney to handle more complex issues on their behalf such as; their finances and property.

Different Types of Power of Attorney

Durable POA

A durable power of attorney means that the powers will be held by the agent even where the principal becomes incapacitated. For this power to be effective, the legal document must include specific language which shows that the principal wants the power to remain in effect even if they are to become incapacitated. This language could be;

1) ‘This power of attorney shall not be affected by subsequent incapacity of the principal’

Or

2) ‘This power of attorney shall become effective upon the incapacity of the principal’

Or

3) Any other language that shows you want the power of attorney to remain in effect even upon incapacitation.

This power can become effective whenever the principal decides. For example; it could start immediately, or the principal may specify a time for it to be effective. The way that this power is terminated is either upon the death of the principal or where the principal decides to terminate it. This means that unless the principal explicitly ends the power, or there is clear termination language, it will remain valid until the death of the principal.

General POA

A general power of attorney gives the same rights and responsibilities that a durable power of attorney provides, but if the principal becomes incapacitated, the power of attorney will be void. This power can be terminated at any time by the principal.

The principal might decide to include a specific date for when the power of attorney will cease, or they may specify that it is to cease following the completion of a specific task.

Limited POA

This is a special form of a general power of attorney, which authorizes the performance of a specific activity on behalf of the principal. This could be to authorize the agent to sell their property or to complete bank transactions whilst they are away.

The power will cease when the specific purpose is fulfilled, or if specified by the principal at a certain time. There is a specific type of limited power used by the California state franchise tax board to allow the tax preparer to talk with the state on someone’s behalf.

Health Care POA

This power specifically gives the agent the power to make medical decisions on behalf of the principal where they are unable to do so due to incapacitation whether this is temporary or long-term. Examples include; refusing life-prolonging treatments and life support.

Tips in choosing a Power of Attorney

· Choose someone you know and trust. Many tend to choose a close family member. It is a good idea to choose someone you trust because there is a risk of abuse where a power of attorney could seek to advance their own initiatives.

· Pick someone with similar values and beliefs to yourself, as they could be making important decisions for you.

· Consider the age, health, and location of your agent because they will be making decisions potentially for a long period of time.

· Name someone else as a ‘successor’ in case something happens to your agent which means they are unavailable or unable to act when necessary.

· If you choose to have more than one agent, you should state whether the majority can act in the absence of another agent.

Getting a Power of Attorney

The principal and agent must both be adults of sound mind at the time the document is created. There must be a witness or notary to observe the signing of the legal document.

The witness or notary must not be;

1) The same person as the agent

2) Your health care provider

3) An employee of your healthcare provider

4) Or otherwise related to anyone giving medical treatment to you.

In sections 4401 to 4701 of the Probate Code, you can find the official forms for the financial power of attorney or health care power of attorney. You can choose whether you want your POA to be ordinary or durable, and effective immediately or only should you become incapacitated. Whilst the statutory form is good in some situations, getting a more robust document through a power of attorney lawyer is desired.

What happens if you do not have a Power of Attorney?

Should you become incapable of managing your own affairs whether those be personal or business it might become necessary for the court to appoint someone to act on your behalf. This could mean that you would have no influence over who this person should be. Therefore, it is important that you consider this decision.

Here is an Infographic for the Power of Attorney