Arguably the second most important role to assign when drafting your estate documents after naming your personal representative (executor) is granting power of attorney (POA). Naming another person as agent (or attorney-in-fact) grants that person authority to act on your (the principal’s) behalf.
In contrast to an executor, who is tasked with carrying out the terms of your will in the event you pass, the agent granted power of attorney is specifically charged with acting on your behalf while you are alive and their power ends upon your death. There are a number of considerations to keep in mind when granting power of attorney.
General vs. Limited Power of Attorney
General POA – As the name implies, when an agent is granted general power of attorney, that person has the authority to handle a broad spectrum of matters in your place, able to do almost anything you can do with regard to your financial picture. An agent with general POA authority can open bank accounts, make investment decisions, transfer funds, pay bills, sell assets, and more on your behalf.
Limited POA – In contrast to general powers, an agent with limited POA is granted the authority to act on your behalf but that authority is restricted to a specific duty or set of circumstances. For example, your CPA may have you sign a limited POA document to specifically allow them to discuss tax matters with the IRS on your behalf. The most common example of a limited power of attorney is appointing someone to make healthcare decisions on your behalf.
It is not uncommon for an aging parent with multiple children to entrust one child with financial decisions while intentionally selecting a second child to serve as their attorney-in-fact for healthcare decisions. This can be for any number of reasons. Maybe one child is better at removing emotions from their decision-making process in a crisis while the other is better with money.
Durable Power of Attorney or Not?
Another key consideration when it comes to leveraging powers of attorney within your estate plan is whether the authority you grant your agent is durable or not.
Durable Power of Attorney – A durable POA remains in effect even if the principal becomes incapacitated, meaning the named agent can continue to make decisions on your behalf up until death (where the responsibility falls to the executor). It is commonly used for long-term financial and healthcare decisions, ensuring continuity of management if you (the principal) can no longer make decisions independently.
Non-Durable Power of Attorney – A non-durable POA, on the other hand, becomes invalid if the principal becomes incapacitated. It is typically used for specific, short-term tasks or transactions, such as selling a property or managing financial affairs temporarily. In most estate planning cases it is more beneficial to make a power of attorney election durable because it allows your affairs to be managed without interruption. If you grant your agent non-durable power of attorney expecting them to handle important end-of-life decisions, they may find themselves unable to act when you need them most, because incapacitation never comes at a convenient time.
A good rule of thumb is that, unless there is a specific set of circumstances, if you’re only wanting to grant a person non-durable POA, you may want to question whether you trust that person enough to grant them power of attorney in the first place.
Immediate vs. “Springing”
Just as the decision between granting durable or non-durable power of attorney should align with your goals for how the authority is used, it’s important to carefully consider whether the powers you grant are immediate or “springing.”
The difference between an immediate power of attorney and a “springing” power of attorney lies in when the authority granted to the agent comes into effect.
An immediate power of attorney gives the agent the authority to act on your behalf as soon as the document is signed. In contrast, a springing power of attorney only takes effect under specific conditions, typically after a triggering event such as you becoming incapacitated and unable to make decisions for yourself. When many folks first meet with an estate attorney, granting springing power seems attractive because it prevents someone from getting access to (and control over) your private matters until you actually need them to have it.
However, in most cases, making a power of attorney election immediate is more beneficial because it avoids potential delays and complications. With a springing power of attorney, determining and proving your incapacitation can lead to legal challenges or delays, especially if there’s disagreement about your condition. An immediate power of attorney ensures that your agent can step in and act without any hurdles when needed.
Revoking Powers of Attorney
Now unfortunately, despite your careful consideration and best efforts to get your estate planning in order, it’s possible that at some point you will need to revoke power of attorney you previously granted. Maybe somebody intentionally abused their power to cause you harm or perhaps you have simply drifted away from an old friend and want to reassign the power to someone else.
To revoke a power of attorney (POA) that you previously granted, there are a few steps you need to take:
- Create a Written Revocation – Draft a document that clearly states you are revoking the specific power of attorney. Include your full name, the date of the original POA document, the name of the agent, and a statement that you are revoking their authority. Note: Though not always required, getting your revocation notarized is considered best practice!
- Notify the Agent – Provide your agent with a copy of the revocation document to inform them that their authority is no longer valid.
- Inform Third Parties – Notify any relevant institutions, such as banks, healthcare providers, or financial advisors, that the POA has been revoked. Provide them with a copy of the revocation document.
- Retrieve Copies of the Original POA Document – If possible, retrieve and destroy hard copies of the original POA document to prevent further use.
- Consider Filing with a Court or Public Record – If you recorded the original Power of Attorney with a county clerk’s office (such as for the facilitation of real estate transactions) or other record keeper, you may need to file the revocation with the same office to ensure it is legally recognized.
It’s also a good idea to consult with an attorney to ensure the revocation is properly executed.
Obtaining Power of Attorney for Someone Who is Incapacitated
While it’s ideal (and highly encouraged) to get your estate documents in order sooner rather than later, more than half of Americans do not have a documented estate plan. That means that many people are left scrambling to try to make sure their loved ones are taken care of and their affairs are handled. If, for example, you have a parent who has been diagnosed with dementia or is otherwise considered incapacitated, you may be wondering what you need to do in order to get power of attorney on their behalf.
The short answer is that power of attorney is no longer an option once the principal (in this case, your parent) is incapacitated as they are not considered legally capable of granting these powers. However, there are other ways to be able to make decisions on this person’s behalf.
Because the principal (your parent) is no longer fit to give their consent and grant POA, an agent (you) must petition the Circuit Court to be appointed as an adult guardian or conservator in order to handle the principal’s affairs.
You will likely have to pay court costs and wait for a court hearing, so this procedure could be time-consuming, expensive, and inconvenient. It’s also possible that the court will name someone else as the guardian or conservator instead of you because they think they are more qualified. This can lead to conflict, especially in cases where the principal has more than one child fighting for control. The conservator or guardian may also be required to file paperwork regularly with the court.
It’s always best practice to get your estate plan and any applicable power of attorney documents in order as a precaution before you actually need them to prevent headaches and conflict should something happen to you.
