Power of Attorney

Power of attorney refers to the granting of authority to one individual to make decisions for, and to act on behalf of, another individual. Power of attorney maybe granted for a wide variety of situations, and may be assigned for one specific purpose, or to allow the individual given power of attorney to handle all of the principle’s personal and financial affairs. The laws governing power of attorney vary by jurisdiction. To explore this concept, consider the following power of attorney definition.

Definition of Power of Attorney

Noun

1. The authority given to a person or entity to act on behalf of another person or entity in legal or financial matters.
2. A legal document giving one person or entity to act on behalf of another person or entity in legal, financial, or personal matters.

Origin

1740-1750        English common law

What is Power of Attorney

A power of attorney is a legal document in which one person, called the “principal,” or “grantor,” gives another person, called the “attorney-in-fact,” or “agent,” legal authority to act on the principal’s behalf. In some jurisdictions, verbal authority may be recognized in some circumstances, though such authorization to act may be difficult to prove if challenged. When an individual names an attorney-in-fact, he may specify how much power the agent has, or over which specific issues the agent is given authority. While a power of attorney is commonly used to enable an agent to care for an individual’s affairs when he has become mentally incapacitated, this device may be helpful in any number of situations.

What is an Attorney-in-Fact

In some jurisdictions, the individual given authority to act on behalf of the principal is called an “attorney-in-fact.” An attorney-in-fact is not an attorney in a legal sense, but acts as the principal’s agent. When an attorney-in-fact is appointed, he has a fiduciary duty to be completely honest in his dealings with, and on behalf of, the principal.

How is an Attorney-in-Fact Paid

In some cases, an attorney-in-fact may be paid for his services. If this is the case, this agreement must be made in a separate contract, and kept private. In the event the principal fails to provide payment as agreed, the contract can be enforced by a court.

Types of Power of Attorney

Powers of attorney are used in a variety of situations in which an individual is unable to handle all of his own affairs, whether during a specific period of time, or over a specific transaction. This might occur when the principal is traveling, or is engaging in business far from home. This might also occur if the principal is temporarily mentally or physically unable to take care of his affairs. There are several types of power of attorney, each of which is used in certain specific situations.

General Power of Attorney

A general power of attorney provides the named agent with broad authority when it comes to making decisions on the behalf of the principal. This power can include the handling of business transactions, financial management, settling legal claims, making gifts to people or organizations, purchasing life insurance for the principal, and other issues that may arise. Also referred to as a “financial power of attorney,” powers granted by a general power of attorney include:

• Dealing with bank transactions
• Managing and entering safety deposit boxes
• Entering into contracts
• Purchasing and managing real property
• Purchasing personal property
• Purchasing life insurance policies
• Settling legal claims
• Dealing with issues related to the agent’s government benefits
• Filing tax returns

Special Power of Attorney

Unlike the sweeping powers granted in a general power of attorney, only specific, limited powers are given to the named attorney-in-fact in a special power of attorney. The special power of attorney is often used to allow the agent to take care of a single transaction, or to act during a very limited time period. Special powers of attorney are commonly used in such transactions as:

• Buying or selling real or personal property
• Managing real property
• Engaging in transactions involving U.S. securities
• Collecting debts
• Borrowing money
• Managing business interests
• Making financial decisions
• Making estate planning decisions

Durable Power of Attorney

A regular power of attorney ends when it is no longer needed, or once the duties are fulfilled. It typically ends in the event the principal becomes incapacitated, unless certain language, referred to as a “durability clause,” is included to ensure it continues in effect. A durable power of attorney, therefore, remains in effect even when the principal becomes incapacitated. In simple terms, a durable power of attorney safeguards the principal should he become unable to make decisions for himself by automatically granting the attorney-in-fact power to oversee financial or medical matters.

Springing Power of Attorney

While a durable power of attorney allows the agent’s authority to continue in the event the principal becomes incapacitated, a springing power of attorney does not go into effect until or unless the principal becomes incapacitated. Creating a springing power of attorney allows an individual to plan for the possibility of such a thing occurring, granting authority to someone he trusts to handle his affairs in the event he is unable.

For example:

Enid, with the help of her attorney, created a spring power of attorney, giving authority to her sister to handle all of her personal and financial affairs in the event she becomes incapacitated. Enid’s sister has no authority to act until her sister is unable to handle her affairs herself. Three years later, Enid is involved in a car accident that leaves her with a serious head injury, rendering her incapable of making decisions and acting on her own behalf. At this time, Enid’s power of attorney “springs” into effect, enabling her sister to act on her behalf.

Medical Power of Attorney

A medical power of attorney is a document in which an individual outlines their wishes should they ever become too ill to care for themselves or make their wishes known. More commonly called a “durable power of attorney for health care,” the medical power of attorney also authorizes someone as an attorney-in-fact, to made important decisions regarding the principal’s medical care. This generally includes making decisions on giving, withholding or stopping medications, medical treatments, and diagnostic procedures. The agent in an medical power of attorne is obligated to follow the principal’s wishes as outlined in the document, and to follow such a treatment plan whenever possible.

To make such a difficult situation easier, the principal can also create a living will, or “health care directive,” which provides instructions for healthcare providers regarding end-of-life care. Copies of a living will are given to the principal’s doctors and other healthcare providers, and one should be kept by family to be provided to emergency medical personnel in the event they are called to the home in a medical emergency.

Terminating Power of Attorney

Terminating a power of attorney can be accomplished in several ways. Power of attorney documents are not, in most cases, required to be filed with the court. If such a document has not been filed with the court, it can be considered terminated when the principal dies. If it was registered with the court, the power of attorney must be revoked by filing a revocation document.

A springing power of attorney that has been activated by the principal’s temporary incompetence becomes inactive, or terminates, when the principal again becomes competent to handle his own affairs. Alternatively, it is possible to include a clause within the power of attorney document that specifically states how the document can be revoked. In the event the attorney-in-fact dies, and the principal has not named a successor agent, the power of attorney is also considered to be terminated.

For example:

John has a springing durable power of attorney naming Edward as his attorney-in-fact in the event John becomes incapacitated. John suffers a stroke, leaving him unable to deal with his own financial affairs, at which time Edward begins serving as his agent. Four years later, Edward passes away, and there is no successor attorney-in-fact named in John’s power of attorney document. Because John is now unable to alter or amend this legal document, the power of attorney is simply terminated.

Choosing an Attorney-in-Fact

When an individual chooses someone to act as his attorney-in-fact, it is important to appoint someone who is trustworthy beyond a doubt. An attorney-in-fact is often a relative or close friend, but may be an experienced attorney. Regardless of who is appointed, the agent should trusted to look out for the principal’s best interests at all times and to not abuse the powers granted to him as attorney-in-fact. An attorney-in-fact should keep careful records of all transactions performed on the principal’s behalf in case questions or issues arise. Because such an agent may be held liable for intentional misconduct, the requirement for careful records helps deter such behavior.

Power of Attorney Form

While a power of attorney document can be created and personalized to suit any individual’s needs, it is important that it also adhere to the probate laws of the state in which it is created. With this in mind, an individual in need of such a document may obtain a power of attorney form specific to his jurisdiction from a local attorney, or from any one of a number of online sources.

A power of attorney form must be filled out completely, with the principal being as specific as possible about how he would like his affairs handled, and naming an attorney-in-fact. It is a good idea to name a successor attorney-in-fact to serve in the event the first agent becomes unable or unwilling to continue. The power of attorney form must be signed and dated by the principal in the presence of a notary public. Some states recognize power of attorney forms signed by two witnesses without the need for a notary public.

If there is any doubt as to whether the validity of a power of attorney, or the state of mind of the principal, will be questioned, certain steps can be taken to convince a court. These include video taping the reading and signing of the power of attorney form, including signing by the witnesses. The video recording should be stored with the original document in a safe place. Additionally, a letter from the principal’s doctor, dated within a few days of the signing of the document, may confirm that the principal was competent at the time he created the document.

Terri Schiavo’s Failure to Have a Power of Attorney

In 1990, a woman named Terri Schiavo had a heart attack, which deprived her brain of needed oxygen. This left her in a waking coma, unable to care for herself in any way. In fact, Terri received nutrition and water through a feeding tube inserted into her stomach.

After ten years of being kept alive in this manner, Terri’s husband, Michael, requested an order from the court asking to have her feeding tube removed, so that Terri could pass away naturally. Michael and family friends testified that Terri had expressed to them before her heart attack that she did not ever want to be kept alive by machines. Terri’s parents disagreed however, and tried to convince the court to deny Michael’s request, and to remove Michael from his position as Terri’s guardian. This argument was tried, and appealed to the Florida Supreme Court, each hearing resulting in the removal or replacement of Terri’s feeding tube.

In 2005, Terri Schiavo’s feeding tube was removed for the final time, against the wishes of her parents, and at the request of her husband. Terry died shortly thereafter. Terri did not have a power of attorney document, and had not left a living will, stating specifically what her desires were regarding end-of-life care, or appointing someone to make such decisions on her behalf.

While there was much speculation over the possible causes of Terri’s condition, the fact remains that thirteen years of legal and political wrangling could have been avoided had she appointed someone to act as attorney-in-fact on her behalf.

Related Legal Terms and Issues

• Agent – A person authorized to act on behalf of someone else, such as an employee, broker, or sales representative.
• Contract– An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
• Entity – An individual, company, association, trust, or other organization that is legally recognized in the eyes of the law. A legal entity is able to enter into contracts, take on obligations, pay debts, be sued, and be held responsible for its actions.
• Grantor – A person that creates a will, trust, or power of attorney.
• Incapacitated – To be unable to act or respond.
• Jurisdiction – The legal authority to hear legal cases and make judgments; the geographical region of authority to enforce justice.
• Personal Property – Any item that is moveable and not fixed to real property.
• Real Property – Land and property attached or fixed directly to the land, including buildings and structures.
• Revocation – The act of withdrawing or nullifying a contract or document.