Understanding the Power of Attorney
Definition and Types of Power of Attorney
A Power of Attorney (POA) is a legal document that grants an individual (known as the “agent” or “attorney-in-fact”) the authority to act on behalf of another person (known as the “principal”). The agent can make decisions and take actions as if they were the principal.
There are several types of POA, including general, limited, durable, and springing. A general POA gives the agent broad authority to act on behalf of the principal in all matters, while a limited POA only grants specific powers for a limited time period. A durable POA remains in effect even if the principal becomes incapacitated, while a springing POA only becomes effective under certain conditions specified in the document.
It is important to carefully consider the type of POA that is appropriate for your situation and to work with a lawyer to ensure that the document is legally binding and reflects your wishes.
How Does Power of Attorney Work?
To create a POA, the principal must choose an agent and draft a legal document that outlines the specific powers granted to the agent. The document must be signed by the principal and witnessed by a notary public to be legally valid.
Once the POA is in effect, the agent can act on behalf of the principal as authorized in the document. This may include making financial decisions, signing legal documents, and making healthcare decisions.
It is important to note that the agent has a legal obligation to act in the best interests of the principal and to follow the instructions outlined in the POA document. The agent may be held liable for any actions that are not authorized by the POA or that violate the legal duties of the agent.
The POA may be terminated by the principal at any time, as long as they are still mentally competent to do so. In some cases, the POA may also be terminated automatically, such as when the agent dies or becomes incapacitated.
Reasons for Creating a Power of Attorney
There are several reasons why an individual may choose to create a POA. These may include:
Incapacity: The principal may want to ensure that their financial and medical affairs are taken care of in the event that they become incapacitated and are unable to make decisions for themselves.
Convenience: The principal may be unable to attend to certain matters and may wish to delegate the authority to act on their behalf to someone they trust.
Business matters: The principal may wish to grant their agent authority to make business decisions on their behalf, such as signing contracts or conducting transactions.
Estate planning: The principal may wish to include a POA as part of their estate plan to ensure that their affairs are handled according to their wishes in the event of their death or incapacitation.
Travel: The principal may be traveling outside the country and want to grant their agent authority to handle certain matters in their absence.
Regardless of the reason for creating a POA, it is important to work with a lawyer to ensure that the document reflects the principal’s wishes and is legally valid.
Legal Rights and Responsibilities of the Agent
As an agent under a POA, there are several legal rights and responsibilities that must be upheld. These include:
Fiduciary duty: The agent has a legal obligation to act in the best interests of the principal and to avoid any conflicts of interest.
Record keeping: The agent must keep accurate records of all transactions and decisions made on behalf of the principal.
Duty of care: The agent must exercise the same level of care and diligence in making decisions as they would if it were their own affairs.
Confidentiality: The agent must maintain the confidentiality of all information related to the principal’s affairs.
Accountability: The agent must be accountable to the principal and any other interested parties, such as family members or other beneficiaries.
If the agent fails to fulfill their legal obligations under the POA, they may be held liable for any damages or losses that result from their actions. It is important for the principal to choose an agent who is trustworthy and capable of fulfilling their responsibilities under the POA.
When and How to Revoke Power of Attorney
A POA may be revoked by the principal at any time, as long as they are mentally competent to do so. There are several reasons why the principal may choose to revoke the POA, such as:
Change in circumstances: The principal’s circumstances may have changed, making the POA unnecessary or inappropriate.
Breach of trust: The agent may have violated their legal obligations under the POA, such as by acting in their own interests rather than in the best interests of the principal.
Incompetence of the agent: The agent may have become mentally or physically incapacitated, making them unable to fulfill their duties under the POA.
To revoke a POA, the principal must draft a revocation document and provide it to the agent and any other parties who may have relied on the POA. The revocation document should be signed, dated, and notarized to be legally valid.
It is important to keep in mind that revoking a POA does not necessarily terminate any actions or transactions that were taken by the agent while the POA was in effect. The principal may need to take additional legal action to address any issues that arise as a result of the revocation.