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Do You Need A Power of Attorney?

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Senior man signing a contract in his attorney's office.

WHAT IS A POWER OF ATTORNEY?
A Power of Attorney is a written document by which you give to another person the legal authority to manage your financial, personal, or other affairs. You are called the “Principal” and the person you grant the legal authority to is called your Agent. By executing a Power of Attorney, you get to choose who you would like to be your agent. Your agent under your Power of Attorney is called your “Attorney-in-Fact.” However, that person is not normally a lawyer.

It is usually the intention of the Principal that his or her Attorney-in-Fact to have the legal right to manage the Principal’s financial affairs in the event the Principal becomes incapacitated, or otherwise unable to handle his or her affairs. The power you grant in your Power of Attorney can be as narrow, or as broad, as you want. However, upon the incapacity of the Principal, the Attorney-in-Fact can no longer legally manage the Principal’s financial affairs unless the power is “Durable.”

DOES A POWER OF ATTORNEY NEED TO BE NOTARIZED?
Although it is not a legal requirement that your Power of Attorney document be notarized, it is a good idea. In fact, in the many years I have practiced law, I have yet to see a Power of Attorney that was not notarized. Furthermore, a notarized Power of Attorney is more likely to be honored by any person your Agent deals with on your behalf.

WHO SHOULD YOU NAME AS YOUR AGENT?
Your Power of Attorney can be given to any person you choose. But you should choose a person you trust. Whether your agent is a family member, friend, or advisor, be sure to choose a person you trust, and will conduct your affairs in accordance with your wishes.

THE DIFFERENT TYPES OF POWER OF ATTORNEY
There are different types of Power of Attorneys designed to accomplish different things. Below are three different types:

  • Conventional Power of Attorney
    A conventional Power of Attorney gives authority to your Agent to manage your financial affairs. The power granted in a conventional Power of Attorney terminates (1) at the incapacity or death of the Principal, (2) when the Principal revokes it, or (3) when it expires by its own terms.
  • Durable Power of Attorney
    A Durable Power of Attorney grants general or specific authority to the Agent, but it is “durable” in that it continues to be in effect after the incapacity of the Principal. However, to be “durable,” the Power of Attorney must contain language that specifies that it will survive the incapacity of the Principal.
  • “SPRINGING”  Power of Attorney
    You have the option of executing a “springing” Power of attorney that would only become effective when you become mentally incapacitated. Incapacitation is generally established when your physician, or a physician specializing in the field causing your incapacity, or both, indicates that in his or her opinion you have become incapacitated. However, I do not recommend a springing power. Instead, I favor an escrow agreement under which your “escrow” agent holds your power of attorney until your physician tells that escrow agent that you have become incapacitated, or you personally request that it be released.

WHEN SHOULD I SIGN A DURABLE POWER OF ATTORNEY DOCUMENT?
All adults should have at least a basic estate plan that incorporates a Durable Power of Attorney. However, you must be competent when you execute the document. In order to ensure that your affairs will be managed by someone you trust, in the event that you should become incapacitated, you should sign such a document while you are in good health.