Power of Attorney
It's important to have someone you trust speak for you in certain situations. Most people understand power of attorney to be something that comes into play in medical situations, but it spans many other circumstances as well.
What is Power of Attorney?
A power of attorney is a legal document that allows one person ("appointee") to act in the place of another ("principal") and to make certain decisions described in the power of attorney. A power of attorney can be effective immediately upon execution (a “Durable Power of Attorney”) or upon a person becoming incapacitated (a “Contingent Durable Power of Attorney”). A power of attorney allows a trusted friend or family member to handle your business or other financial affairs for a period of time for specific or general tasks or situations.
What is a Power of Attorney Agent?
A power of attorney agent is often times also called an "attorney-in-fact." This person is appointed by someone to legally represent them. This is done by creating a power of attorney form, which only needs to be notarized (recorded by your county) if it involves real estate. This form will list the tasks that the agent is supposed to perform on behalf of the appointee. The form should also be passed out to anyone the agent has been appointed to handle business on your behalf with. Depending on what the agent is appointed to do, the appointee may need to send a copy to the bank, insurance companies, or even stockbrokers. This document also may be used until it is revoked. This is done with a revocation power of attorney form or by specifying a termination date on the original document.
How a Principal Should Handle Power of Attorney
Most states don't require a power of attorney to be filed with the County Clerk office, but estate lawyers and financial institutions will recommend you to place on file there to protect your estate upon death. Another thing commonly recommended is that you keep a list of who has a copy of it, and that you tell your agent to make it clear their signing on your behalf to whomever they do business with. If the appointee ever becomes incapacitated then the powers given to the agent is immediately revoked, unless a durable POA is used. The best advice I've heard given to agents is to make decisions based on the way your appointee would make them. You're not supposed to mismanage your appointee's assets; rather, you should handle them as if they were your own. Also, avoiding misunderstandings by communicating is key.
Ultimately, the above is just a guideline. Any uncertainties or other questions should be brought to the attention of your attorney or an attorney specializing in estate planning.
Types of Power of Attorney
Sometimes people may make their power of attorney form very broad or sometimes may limit the appointee to very specific actions. A power of attorney can be used to give someone the right to sign a contract for you, make healthcare decisions, to handle your money or money transactions, the right to sell your home or car, and including any other legal right to do what the maker of the power of attorney can do themselves.
A "Limited Power of Attorney" gives the appointed delegate the authority to do a specific act, like only the authority to sell your home for you.
A "General Power of Attorney" usually gives the appointed delegate the very broad powers to perform any legal act on behalf of the maker of the power of attorney. These are often times used to list activities you want the appointed delegate to perform.
A "Durable Power of Attorney" was created because Limited and General Power of Attorney terminate if the principal (maker of the Power of Attorney) becomes incapacitated. A Durable Power of Attorney will not terminate it will continue to remain effective even if a person becomes incapacitated. In every state there are usually laws were a Durable Power of Attorney can no longer be used for an incapacitated principal in certain circumstances. A Durable Power of Attorney must contain special wording that provides the powers given to the delegate to survive the incapacity of the principal. A Durable Power of Attorney is effective as soon as the principal signs it unless it specifies that there are conditions but the conditions must be within your states laws.
Please note that this is general legal information to provide basic information about power of attorney forms, and for legal advice you should contact an attorney. Since your states laws are constantly changing, it is always best to consult an expert regarding your particular case.