This article is not intended to provide you with legal advice. Should you seek legal advice, please consult an attorney. KTS would gladly recommend an attorney should you need one. It’s important to have an attorney take appropriate actions on your behalf and to avoid issues that may be discussed in this article.
It Pays to Know about a Power of Attorney
There may come a time when you or someone you love will need assistance in making important life decisions relating to finances, medical, and real estate. A Power of Attorney (POA) may be necessary to help you or a loved one who would otherwise be incapable of caring for themselves and making such decisions.
Who will have the legal authority in a POA?
A Power of Attorney gives someone the legal authority to manage your business and/or personal affairs as laid out in the POA document. It gives a named individual the legal status to make decisions and give directives on your behalf. This legal status/authority can be broad or narrow. The details of a POA are provided in the legal document, which lays out what types and degree of authority is permissible.
The POA can be permanent or temporary. For example, you may need a temporary Power of Attorney if you become ill or go on a trip and will be absent for something that commands action to be taken. In this type of situation, you could designate a POA yourself in a power of attorney document.
You will also be able to decide the perimeters of what they can manage for you, like their authority and restrictions. So, you can choose the person to act on your behalf, and authorize a limited power of attorney to suit your needs.
Of course, a POA can also be permanent when you can no longer take care of yourself and/or become incapacitated or disabled, making you unable to manage your personal, financial, and/or business affairs. In these permanent cases, a court may appoint a guardian, conservator, or more than one person (committee) to officially manage your affairs, through a public proceeding.
The person who is named within the POA to manage your specific affairs is called an “attorney-in-fact” or agent. They can make decisions for you and act on your behalf as indicated by what is allowed and detailed in the document, which typically must be presented before the legal authority is invoked.
Who should I give POA to act on my behalf?
When you plan ahead for a time when you may need someone to manage your decisions, you have the ability to decide who you want and trust to be your agent. Unfortunately, if you do not have someone designated in advance, and you lack the mental capacity to do so, the court may end up deciding on your agent or attorney for you.
So, who should you give the Power of Attorney to manage your business, financial, or personal matters when you are unable to handle them yourself? Many people choose their spouse, children, or other family members to make decisions and give directives. The authority and limits that you decide will be detailed in your POA. The American Bar Association suggests that you choose and name more than one individual in case one of your agents is not able to act when the time comes.
Be sure to check with your attorney on other important directives that you may consider when naming multiple people. For example, what if your agents do not agree? Will you require a majority consensus? This is especially important when decisions relate to your medical care.
What do I have to do to give or get a Power of Attorney?
It’s important to remember that when you give someone the Power of Attorney to act and make decisions for you, you are giving them a “sweeping authority” to do things that will affect your financial and personal matters. The POA is a legal binding document. Planning in advance and naming those who you wish to manage your affairs will give you peace of mind to know those you trust will take care of things for you.
If you are looking to become an agent for a loved one, you may have to go to court if they are incapacitated, disabled, and/or no longer able to make decisions for themselves. If they still have the mental capacity needed, they may be able to name you in the legal POA form.
Either way, you will need to know your state laws regarding seeking or giving the Power of Attorney, which is the legal authority to act on another individual’s behalf. For example, most states require that you give written notice to your agent if you decide to revoke their authority.
In addition, most states allow what is called a “durable” POA that remains valid until revoked or death. In other cases, there may be dates stated that terminate the authority given. Reviewing the document is advised as well as consulting with an attorney who specializes in POAs.
Is there more than one type of POA?
Exactly how many types of Power of Attorney exist depends on your state. In addition, to a General Power of Attorney or Limited Power of Attorney, other types may include a Financial Power of Attorney, Medical Power of Attorney, Durable Power of Attorney, Special Power of Attorney, or Springing Power of Attorney. Check with your state for what types are available to you or your loved one. Here’s a basic review of these POAs:
General POA
This Power of Attorney gives your agent the same rights and authority that you have, which make it comprehensive. Such authority allows your agent to do things like handle financial transactions or sign papers.
Limited POA
A limited POA is very limited and typically designated for a specific purpose. For example, you may need your agent to sign an important set of documents while you are out of the country. This type of Power of Attorney usually states the end time of the agent’s authority.
Financial POA
The Financial Power of Attorney gives someone the authority to make certain financial decisions for you. You can appoint someone to manage your money, pay bills, and to manage your investments and property. To access your bank and other financial accounts, the financial organization will want to see and copy the document and request to see the agent’s identification.
Medical POA
This legal document gives your appointed agent the power and authority to make decisions regarding your health care directives. Your agent will have the responsibility of making sure that your doctor and other medical personnel provide appropriate care.
Durable POA
This type of POA gives your agent a limited or wide spectrum to act in business and legal affairs. It stays in effect until it is revoked or until your death. Special wording is included in the document that allows the permission of authority to remain if you become mentally incompetent. This is what makes it different from a General POA.
Special POA
The Special power of attorney gives specific powers to your appointed agent, to perform on your behalf. The key idea is, the special power of attorney limits the scope of decisions to be made on your behalf.
Springing POA
This POA “springs” into action and becomes effective when you become incapacitated but not before and should be specifically stated in the document. It’s important to define “incapacitated” as well as what would trigger the Power of Attorney.
What can’t be done with a POA?
Although the authority of a POA can be broad, there are some things that cannot be done by an appointed Power of Attorney. For example, the agent cannot make decisions or give directives that you yourself would not normally handle. There are a number of other actions that cannot be taken by the agent. Here is a list of some items that are not allowed under a Power of Attorney:
- The agent is not allowed to “gift” to themselves property or money that belongs to the principal (the person they are making decisions for).
- Decisions cannot be made on your behalf after your death.
- An agent may not change the Power of Attorney or transfer it to someone else.
- The POA agent cannot change your will or create one for you.
- The agent cannot break their fiduciary responsibility, which is to act in your best interests.
- An agent cannot vote in your place in elections.
- Your agent cannot be paid for services provided to you.
As an agent, you have a fiduciary duty to act appropriately and in the best interests of the principal. You can face civil and criminal consequences for violations of a POA. For example, abusing the principal, forgery, theft, and fraud are all serious offenses that would be punishable by law.
Can someone override a Power of Attorney?
The short answer is yes. If an agent is violating their fiduciary duty, abusing the principal, mishandling funds and real estate, and/or participating in other offenses, their authority can be revoked. If you are the principal and mentally competent, you can revoke the POA. On the other hand, if you are a family member who wishes to override an agent’s authority, you should seek help from an attorney as it will require legal action.
Planning ahead may be your best course of action.
Life throws us unexpected curves. It’s difficult to predict what lies ahead. One of the best ways to protect yourself should you become mentally incompetent is to plan in advance how you want your personal, financial, and real estate to be managed.
One way to prepare is to appoint an attorney-in-fact or agent you trust to make future decisions for you. This can be done through a Power of Attorney and can make an otherwise difficult situation manageable.
About the author, Carlos Nath:
Carlos Nath is the Senior Trust Advisor with KTS Pooled Trust. As a seasoned professional with over four years of experience in the New York pooled trust space, Carlos has helped thousands to enroll and set up their accounts with KTS. He is proficient in understanding the Medicare process and provides assistance in clarifying what clients may need. Previously, Carlos worked with a Medicaid consulting firm as an advisor who helped clients who were seeking Medicaid assistance.
