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An important part of lifetime
planning is the Power of Attorney. Valid in all states, these documents give
one or more persons the power to act on your behalf. The power may be limited
to a particular activity (e.g., closing the sale of your home) or general in
its application, empowering one or more persons to act on your behalf in a
variety of situations. It may take effective immediately or only upon the
occurrence of a future event (e.g., a determination that you are unable to
act for yourself). The latter are "springing" Powers of Attorney.
It may give temporary or continuous, permanent authority to act on your
behalf. A power of attorney may be revoked, but most states require written
notice of revocation to the person named to act for you.
The person named in a Power of
Attorney to act on your behalf is commonly referred to as your
"agent" or "attorney-in-fact." With a valid Power of
Attorney, your agent can take any action permitted in the document. Often
your agent must present the actual document to invoke the power. For example,
if another person is acting on your behalf to sell an automobile, the motor
vehicles department generally will require that the Power of Attorney be
presented before your agents authority to sign the title will be honored.
Similarly, an agent who signs documents to buy or sell real property on your
behalf must present the Power of Attorney to the title company. The same
applies to sale of securities or opening and closing bank accounts. However,
your agent generally should not need to present the Power of Attorney when signing
checks for you.
Why would anyone give such
sweeping authority to another person? One answer is convenience. If you are
buying or selling assets and do not wish to appear in person to close the
transaction, you may take advantage of a Power of Attorney. Another important
reason to use Powers of Attorney is to prepare for situations when you may
not be able to act on your own behalf due to absence or incapacity. Such a
disability may be temporary (e.g., due to travel, accident, or illness) or it
may be permanent.
If you do not have a Power of
Attorney and become unable to manage your personal or business affairs, it
may become necessary for a court to appoint one or more people to act for
you. People appointed in this manner are referred to as guardians,
conservators, or committees, depending upon your local state law. If a court
proceeding, sometimes known as intervention, is needed, than you may not have
the ability to choose the person who will act for you. With A Power of
Attorney, you choose who will act and define their authority and its limits,
if any.
What are these powers of
attorney?
A Power of Attorney is a
written document in which a competent adult individual (the
"principal") appoints another competent adult individual (the
"attorney-in-fact") to act on the principal's behalf. In general,
an attorney-in-fact may perform any legal function or task which the
principal has a legal right to do for him/herself.
The term "durable" in
reference to a power of attorney means that the power remains in force for
the lifetime of the principal, even if he/she becomes mentally incapacitated.
A principal may cancel a power of attorney at any time for any reason. Powers
granted on a power of attorney document can be very broad or very narrow in
accordance with the needs of the principal.
Why is Power of Attorney so
important?
Every adult has day-to-day
affairs to manage, such as paying the bills. Many people are under the
impression that, in the event of catastrophic illness or injury, a spouse or
child can automatically act for them. Unfortunately, this is often wrong,
even when joint ownership situations exist.
The lack of properly prepared
and executed power of attorney can cause extreme difficulties when an
individual is stricken with severe illness or injury rendering him/her unable
to make decisions or manage financial and medical affairs. All states have
legal procedures, guardianships or conservatorships, to provide for
appointment of a Guardian. These normally require formal proceedings and are
expensive in court. This means involvement of lawyers to prepare and file the
necessary papers and doctors to provide medical testimony regarding the
mental incapacity of the subject of the action. The procedures also require
the involvement of a temporary guardian to investigate, even intercede, in
surrogate proceedings. This can be slow, costly, and very frustrating.
Advance preparation of the
power of attorney can avoid the inconvenience and expense of legal
proceedings. This needs to be done while the principal is competent, alert
and aware of the consequences of his/her decision. Once a serious problem
occurs, it is too late.
The Power of Attorney can be
effective immediately upon signing or only upon disability. Some examples of
legal powers contained in the Power of Attorney are the following:
1. 2. REAL ESTATE: To execute
all contracts, deeds, bonds, mortgages, notes, checks, drafts, money orders,
and to lease, collect rents, grant, bargain, sell, or borrow and mortgage,
and to manage, compromise, settle, and adjust all matters pertaining to real
estate. 3. ENDORSEMENT OF NOTES, ETC.: To make, execute, endorse, accept, and
deliver any and all bills of exchange, checks, drafts, notes and trade
acceptances. 4. PAYMENT OF NOTES, ETC.: To pay all sums of money, at any
time, or times, that may hereafter be owing by me upon any bill of exchange,
check, draft, note, or trade acceptance, made, executed, endorsed, accepted,
and delivered by me, or for me, and in my name, by my Agent. 5. STOCKS,
BONDS, AND SECURITIES: To sell any and all shares of stocks, bonds, or other
securities now or hereafter, belonging to me, that may be issued by an
association, trust, or corporation whether private or public, and to make,
execute, and deliver any assignment, or assignments, of any such shares of
stock, bonds, or other securities. 6. CONTRACTS, AGREEMENTS, ETC.: To enter
into safe deposit boxes, and to make, sign, execute, and deliver,
acknowledge, and perform any contract, agreement, writing, or thing that may,
in the opinion of my Agent, be necessary or proper to be entered into, made
or signed, sealed, executed, delivered, acknowledged or performed. 7. BANK
ACCOUNTS, CERTIFICATES OF DEPOSIT, MONEY MARKET ACCOUNTS, ETC.: To add to or
withdraw any amounts from any of my bank accounts, Certificates of Deposit,
Money Market Accounts, etc. on my behalf or for my benefit. To make, execute,
endorse, accept and deliver any and all checks and drafts, deposit and
withdraw funds, acquire and redeem certificates of deposit, in banks, savings
and loan associations and other institutions, execute or release such deeds
of trust or other security agreements as may be necessary or proper in the
exercise of the rights and powers herein granted; Without in any way being
limited by or limiting the foregoing, to conduct banking transactions as set
forth in section 2 of P.L. 1991, c. 95 (c. 46:2B-11). 8. TAX RETURNS,
INSURANCE AND OTHER DOCUMENTS: To sign all Federal, State, and municipal tax
returns, insurance forms and any other documents and to represent me in all
matters concerning the foregoing.
You should contact your
attorney to have a Power of Attorney Prepared, together with a Will, Living
Will and other vital Estate Planning documents.
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