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What is a Power of Attorney?

Posted by attorney Matthew Johnson

No estate plan, no life plan, no emergency plan is complete without a power of attorney document. The power of attorney is one of the most important things anybody can do to legally safeguard themselves, securing their children, and providing a concrete plan for their loved ones. Just the term “power of attorney" is a somewhat confusing pious legal phrase for something pretty simple.

So what is a “power of attorney"? A power of attorney document allows another person, over the age of 18 and competent, to make decisions on your behalf while you are alive. A power of attorney can be very limited, or very broad; it’s up to the individual signing the document. If a person passes away, then the power of attorney automatically expires and no longer allows named person to make decisions on your behalf. Powers of attorney are divided into a few different categories.

The legal jargon used to describe the players involved include the “principal" who the individual giving the right to make decisions. The “agent" is the person whom is allowed to act on behalf of the principal.

While anybody is conscious and competent, they are able to override the decisions of a designated agent. So you can name an agent, and then override their decision if you are still able to speak and competently understand your present situation. Thus powers of attorney are less useful at times when you can speak for yourself.

While the principal always has the right to revoke a power of attorney while conscious, the agent also has a powerful legal duty. Called a “fiduciary duty", the agent must act in the best interest of the principal when exercising the agent’s decision-making power. A misuse of authority is called a “breach of fiduciary duty". A fiduciary duty is enforceable in a court of law, so if the agent misbehaves, steals, or misuses his/her power through conflicts of interest or self-serving dealings, a court is free to impose criminal or civil charges against the agent. Judges hate breaches of fiduciary duty, and while a

Powers of attorney are most valuable when you are unconscious (due to injury), will be absent, or lose mental capacities. While absence can be predicted, such as being on work trips and military persons going overseas; incapacity and mental incompetence are nigh impossible to predict.

Powers of attorney is categorized by when the power becomes effective (standard, durable, or springing), and what decision making powers are granted to the agent.

A “standard power of attorney" allows another to make decisions on your behalf while you are still lucid, competent, and conscious. As soon as you become unconscious, incapacitated, mentally ill to the point of incompetence; the power evaporates. This type of power is typically used for persons who do a lot of international travel, and may not be available to make financial decisions or family decisions while they are away. Standard powers of attorney are uncommon, and with the ever evolving ability to use technology to acquire an individual’s signature, is dying out.

The second type of power of attorney is the “springing power of attorney", which allows a person to make a decision on your behalf only after you become incapacitated, unavailable, or mentally incompetent. However, there should be some sort of mechanism included in the document to determine incapacity, unavailability, or mental incompetence. How many days before you are considered “unavailable"? How are you to be deemed mentally incompetent? The more guidance you can give your family and friends the better.

Finally the “durable power of attorney" is a combination of the springing power of attorney and standard power of attorney; which allows a person to make decisions on behalf of the principal (the person giving the handing over the power) while a person is conscious or available, and after a person becomes unconscious or is unable to make decisions on their own behalf.

A person can have a combination of all three of the above types of power of attorney, split against many individuals, just one power of attorney, or any combination one chooses. What type works for you can vary depending on your personal desire for control, your family dynamics, whether you are married or have children, how much you trust your friends and family, and potentially infinite numbers of other variables. A discussion with an estate planning attorney to dig into your personal situation can help to narrow down when a power of attorney might be beneficial.

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