What is a Power of Attorney?
A power of attorney (POA) is a written authorization to represent or act on another’s behalf in private affairs, business, or other legal matters. The person authorizing the other to act is the principal, grantor, or donor (of the power). The one authorized to act is the agent or attorney-in-fact. The powers you give to your agent can be limited or broad, temporary or long-lasting.
An attorney-in-fact is a fiduciary (a person who holds a legal or ethical relationship of trust on behalf of another party) for the principal, so the law requires the attorney-in-fact to be completely honest with and loyal to the principal. Sometimes the attorney-in-fact, especially if being paid to act for the principal, also is working for the principal under a separate and private contract from the power of attorney itself, which is intended to be shown to various other people.
Types of Power of Attorney
A power of attorney may be: special (also called limited), general, or temporarily limited. A special power of attorney is one that is limited to a specified act or type of act. For example, if you are selling your home but are unable to be present at the closing, you can give someone the power to only sign the deed. A general power of attorney is one that allows the agent to make broad personal and business decisions usually limited only by state law. A temporarily limited power of attorney is one with a limited time frame.
Under common law, a power of attorney becomes ineffective if its principal dies or becomes “incapacitated”, meaning unable to grant such a power because of physical injury or mental illness. Under a Durable Power of Attorney (DPOA), the attorney-in-fact may continue to act and/or make decisions on behalf of the principal even after the principal becomes incapacitated, up to the principal’s death.
Why should you have a Durable Power of Attorney?
A Durable Power of Attorney (DPOA) can be very helpful to you and your family. If you were unexpectedly unable to handle your own affairs due to an accident or illness, the DPOA would give your agent the power to handle your affairs as you would have wanted them handled. If you become permanently incapacitated and do not have a DPOA in place, your family may have to petition the Probate Court to appoint a Conservator of the Estate (COE) for you. This can be a lengthy and expensive process. We explain more about Probate Court here.
When should I update my Durable Power of Attorney?
A Durable Power of Attorney (DPOA) should be updated any time there are changes in your circumstances, changes in the laws (related to DPOAs), or when you need to change your choice of agents. A DPOA should also be re-executed fairly often even if there are no changes to be made in order to keep them “fresh”. In fact, most financial institutions will not accept a DPOA that is over three years old.