Power of Attorney – Something to Consider

A: A power of attorney is but one estate planning tool that can be beneficial to your needs. The power of attorney is a formal document by which the holder of the power called the agent or attorney-in-fact acts in the name of and on behalf of the principal. A writing with a notarized signature of the grantor creates the power. The agent does not ordinarily need to countersign the instrument. Such powers of attorney may be revoked at any time by the grantor and are extinguished upon the death of the grantor.

A typical couple should have two power of attorney documents – one for each spouse. Such powers are created usually in the event one spouse should become incapacitated and assets are in the name of that spouse alone.

There are several types of powers you can create. Depending upon your goals and situation you must select the appropriate type. There is the “regular” power of attorney, durable power of attorney and springing durable power of attorney.

Although incapacity is typically the reason for creating such a power, it is not the only reason. The power can be transactional or special, meaning you grant another person the power to perform a one-time specific act, that only you have authority to do, such as open your safe deposit box. This type of grant of power is the general or regular power of attorney.

Similarly, if you frequently travel you may grant someone else the authority to manage your bank accounts or pay certain debts. Likewise, if you are unavailable and desire to sell real estate, you can provide someone with your power of attorney to sign the documents.

With regard to the preparation of incapacity or disability, the power to create is a durable power of attorney. The difference between a “regular” power of attorney and a durable power of attorney is the subsequent disability or incapacity of the individual does not terminate the power. Upon the incapacity of the principal the typical power of attorney terminates, this is not so with the durable power. Thankfully this is the case, as this is the most needed time and intended purpose for such a power.

A power of attorney can also be springing. This means that the power itself is effective only upon the disability or incapacity of the principal. This type of power is generally not preferred due to the often-complicated determination of when someone is incapacitated. At first many individuals like the idea of the springing power since they will not give up control of their property until they are incapacitated; however, often the determination of incapacity is not clear and as such the power may be challenged. After a consultation with a lawyer, you can devise alternative ways of when the durable power of attorney can be provided to your named agent without the need for a springing power and the need for a medial determination of capacity.

The powers allowed by such a document can be extensive. They may include the power to: sell, assign, transfer stocks, bonds, securities or other property; enter into purchase and sale agreements; invest and reinvest in any stocks, bonds or other securities or property; borrow money and as security pledge, mortgage, endorse for transfer all certificates of stock, bonds or other securities; execute, sign, acknowledge and deliver any deeds, bills of sale or other instruments of transfer or conveyance; represent the principal and vote in his name at any corporate or other meetings and to give to any person or persons general or special proxies; form, incorporate, reorganize, merge, recapitalize, sell, liquidate or dissolve any business; carry out the provisions of any agreement for the sale of any business interest; endorse all promissory notes, bills of exchange, checks, drafts or other negotiable or nonnegotiable papers; deposit funds or property with any banking institution, withdraw any part or all of said deposit, make and sign checks or drafts upon any deposits; go to any safe deposit box; prepare and execute any tax returns; receive and endorse checks; transfer funds to any trust; make gifts; and to do all things necessary to carry out the intent of the principal.
Such powers can be created as extensively as you desire. Conversely, such powers can be created to limit the agent from performing certain tasks.

It is important to note, if you have an old durable power of attorney, and it notes that the agent has the ability to make health care decisions, that provision is no longer valid and the need for a health care proxy is in order.

Overall, the power of attorney is a useful tool. Depending upon your goals you need to carefully select which type of power fits your needs. Such powers can be and often should be customized for the individual, as such, do not rely on any forms you can buy at office supply stores.