A Power of Attorney is a legal instrument that gives certain legal powers from you to another person that you designate. Why does everyone need one? People who are in an accident or who are no longer competent to make their own decisions, need to continue to make financial transactions as long as they are alive. Who will pay the bills, make bank deposits and withdrawals, prepare your tax return, or manage your investments? Who will sign legal documents for you if you cannot, for one reason or another? A durable power of attorney will make life easier for you and your family if times get tough.
The person who signs a Power of Attorney is called the Principal. The Power of Attorney gives legal authority for another person (called an Attorney-in-Fact) to make property, financial and other legal decisions for you. You can give an Attorney-in-Fact broad legal authority, or very limited authority.
Your Power of Attorney can be “immediate” or “springing.” An immediate Power of Attorney is in effect as soon as the Principal signs the Power. The Attorney-in-Fact can go out and act as the agent of the Principal even if the Principal did not intend the Attorney-in-Fact to take immediate action. A springing Power of Attorney does not take effect until you become disabled. The springing Power of Attorney is sometimes used when you do not intend for the Attorney-in-Fact to be able to act as your agent until you are not competent to act for yourself.
The issue with a springing Power of Attorney is that your agent may have to jump through some hoops before he can use the Power of Attorney. Since it cannot be used before you are disabled, you need a doctor (or perhaps two doctors) that will certify that you are not competent. Your agent may not be able to find doctors who are willing to sign a legal document that does certify that you are not competent. Or the institution that your Attorney-in-Fact presents your Power of Attorney to does not accept your document and wants your agent to use their form (very common with banks). If you are not competent, you cannot sign another Power of Attorney.
Obviously, you want your Attorney-in-Fact to be someone you totally trust. You can name your spouse or a relative or even a close friend, so long as that person is at least 18 years of age. Most married persons choose their spouse as their Attorney-in-Fact. You may also wish to name one of your children to act as your Attorney-in-Fact, if your spouse cannot act as your agent. It is not recommended that you name two (2) persons to act jointly as your Attorney-in-Fact. If they cannot agree on an action to take, you have gridlock and no action will take place.
You should ask that person if he wants to act as your Attorney-in-Fact. The person who agrees to act as your Attorney-in-Fact will owe you a fiduciary duty, which means that your best interests must always be placed first while acting as your agent. The Attorney-in-Fact does not have to be compensated, but, especially if the duties are complicated or time-consuming, you may wish to consider compensation.
Decide on who you will designate as your Attorney-in-Fact and call your lawyer to get a durable Power of Attorney signed. If you have already signed one, review it with your lawyer to make sure that the document you signed years ago still meets your needs.
