Many people have heard of a Power of Attorney, but may not be sure exactly what it means. Unlike the name implies, it has nothing to do with being a lawyer. A Power of Attorney, instead, is a document used by one person (the “principal”) to grant authority to another person (the “agent” or “attorney-in-fact”) to act on the principal’s behalf.
While it sounds simple, someone with authority under a Power of Attorney can have a tremendous amount of power. Unless limited, the agent under a Power of Attorney has the ability to perform any legal function or task that the principal has a right to perform. This means the agent can do things like bind the principal into a contract; buy, sell, or lease the principal’s real property; and deposit and withdraw from the principal’s bank accounts, just to name a few. The principal can grant the agent all general powers or limit his power to specific activities, as the principal sees fit.
Why should I have one?
Many people believe that should they become ill or incapacitated, their spouse or child may automatically act on their behalf. Unfortunately, that’s not how it works. Without a Power of Attorney, your family cannot automatically pay your bills or manage your assets, often causing long delays.
Without a Power of Attorney, family members can be granted the authority to act on your behalf, but not after going through a lengthy, formal legal process called guardianships or conservatorships. Having a Power of Attorney can avoid requiring your family to go through such a procedure.
How do I create one?
While Power of Attorney can be simple to establish, you should use a lawyer to create one. Do a quick search and you’ll find plenty of online forms out there, but if not drafted properly, those forms may not be honored by financial institutions. For example, many banks will not honor a Power of Attorney unless it includes certain statutory references. When you don’t use the assistance of an attorney, you can’t be guaranteed your Power of Attorney will be valid.
Beyond using a lawyer, a Power of Attorney must be created while the principal is competent and should be notarized. You’ll want to keep a copy and give a copy to your agent, who will need to present the document when acting on your behalf.
What are my options?
Generally, a Power of Attorney is valid the moment it is executed. It is considered, and often called, “durable” because the powers given to the agent remain in effect for the lifetime of the principal, even if he or she becomes mentally incapacitated.
Instead of the Power of Attorney taking effect immediately, it can also be drafted so that it “springs” or takes effect upon the occurrence of some event. If using a springing Power of Attorney, you’ll want to be sure the triggering event is easily and clearly identifiable, otherwise, institutions may not recognize it as being in effect because there is some doubt whether the event has actually occurred.
A Power of Attorney can be revoked at any time, but usually needs to be done with written notice of revocation to the named agent.
Who should be my agent?
Because a Power of Attorney gives another person great authority to act on your behalf, you’ll want to select your agent as someone who you deeply trust to act in your best interest and who has good financial sense. While your best friend may be great to call at 2 am for comfort, if she can’t balance a checkbook, she’s probably not the best person to appoint as your agent.
In addition to your primary agent, you’ll also want to include a successor agent in your Power of Attorney to act if your primary agent is unwilling or unable.
It is not recommended you appoint co-agents in your Power of Attorney. Should they disagree, there is no way to determine who has the final say. Having more than one agent could result in unnecessary delays because they disagree about what action to take.
If you are interested in having a Power of Attorney drafted for an affordable, flat-fee cost, schedule your consultation today.
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This website includes information about legal issues and legal developments. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. You should contact an attorney for advice on specific legal problems.
Lauren Lester is an affordable family law, estate planning, and probate lawyer licensed in Colorado.
