A Power of Attorney is a legal document in which one person appoints another as his or her agent and gives the agent the authority and power to handle specific financial matters. The person giving the power is known as the “Principal.” The person receiving or holding the power is known as an “Attorney in Fact,” thus, distinguishing that person from an Attorney at Law.
Many Forms – Many Types
Powers of Attorney come in many forms. A Power of Attorney may be very broad. It may authorize the Attorney in Fact to handle any and all financial matters. It may be limited to specific powers or specific assets. For instance, if you contract to sell your home but your job requires you to be out of the city at the time of the closing, a limited Power of Attorney can be executed for the exclusive purpose of allowing the Attorney in Fact to handle the sale of your home during your absence.
An estate planning tool often overlooked is Powers of Attorney for adult children. The document often solves problems that may arise with a child away at college. The Power of Attorney could allow a parent to sign documents, handle bank accounts, and file insurance paperwork on behalf of their out-of-state child.
Powers of Attorney are often executed for the purpose of allowing the Attorney in Fact to handle financial affairs in the event that you are disabled or otherwise incapacitated. These Powers of Attorney are referred to as Durable Powers of Attorney in that they remain in force during a period of disability. These Powers of Attorney are often activated only upon an affidavit signed by your physician stating that you are unable to handle financial affairs. They are called “springing” powers. The Power of Attorney “springs” into existence when the physician declares that you are no longer capable of handling financial affairs.
Execution and Recording
There is no specific form or method of execution required in order to create a Power of Attorney other than your signature, often witnessed, but always notarized. Any form which clearly shows the authority of the Attorney in Fact is sufficient. However, because the Power of Attorney is designated for use when you are not able to transact business yourself, it should be executed with sufficient formality to show on its face convincing evidence of its genuineness and to further make it valid under the law.
When a Power of Attorney becomes effective, it should be recorded in the Office of the Register of Deeds in the county of your principal residence and also in any counties where you own real property.
Selecting an Attorney in Fact
Second only to the decision as to how broad to structure the Durable Power of Attorney, should be your decision as to the proper person to serve as your Attorney in Fact. Remember, this person is often granted the right to handle all of your financial affairs. Selecting an Attorney in Fact whom you trust completely is important. Naming a suitable alternate should your primary Attorney in Fact be unable to serve is equally important.
A Durable Power of Attorney can provide you with important low cost protection against legal complications of disability or incapacity. A properly drafted Durable Power of Attorney will serve as a basis for handling your financial affairs without the necessity of a court supervised Conservatorship should you become disabled.
A Durable Power of Attorney will not cure all financial problems in the event of your disability or incapacity. It will, however, give a trusted friend or family member the ability to handle financial matters on your behalf if you are unable to handle those matters for yourself.
A. Stephen McDaniel