10 Frequently Asked Questions about Power of Attorney

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A phrase that you hear a lot about when as an adult you go to the hospital for any form of treatment is “Power of Attorney”. Many questions come to mind when you first encounter the phrase. To make it easy for you to wade through the swamp, we have compiled below, ten of the most common questions people ask and the answers to them.

  1. What is a power of attorney (POA)?
    A power of attorney, or letter of attorney, is a document that authorizes another person, known as the agent or attorney-in-fact—usually a legally competent relative or close friend over 18 years old—to handle any combination of financial, legal and health care decisions. A power of attorney is also referred to as a POA. Generally, one chooses a POA as a provision if he or she becomes incapacitated. You, the principal, may want (but do not need) an elder law attorney to draw up the document so that it specifies exactly which responsibilities you grant your agent. Establishing a durable power of attorney does not strip you of the power to make decisions; it merely assigns another person to share the responsibility.
  2. What is the difference between non-durable, durable and springing powers of attorney?
    A nondurable power of attorney cannot act on your behalf if you become disabled or incompetent. You would generally choose a nondurable power of attorney for a specific matter, such as handling your affairs in your physical absence. In estate planning, through which seniors plan for future incapacity, all powers of attorney are durable. This means the power of attorney is effective regardless of your health condition. A springing power of attorney becomes effective at a specific time in the future, perhaps in the event of an illness.
  3. How do I decide who to choose?
    It’s crucial you choose someone you trust to act in your best interests, per your explicit instructions—and it’s not always the easiest job. Your agent will have the freedom to handle your assets as he or she sees fit, so you may want to consider a potential agent’s financial knowledge or capacity for seeking and accepting outside help. Your agent will potentially spend a great deal of time acting on your behalf with no financial compensation for these efforts. Never allow anyone to force you to assign a durable power of attorney if you are not fully educated on the process and convinced you are choosing the most trustworthy, responsible person for the job.
  4. How do I execute a durable POA?
    A notary public or attorney must witness your signing the letter of attorney, and, in some states, you need two witnesses. You must be over 18 and fully competent, meaning you understand the implications of your decision. When filling out the form, you’ll specify exactly which powers you are transferring to the agent. If the durable power of attorney specifies responsibilities regarding real estate, the letter of attorney should be recorded with the Registry of Deeds, which you’ll find in the county courthouse where your property is located. Give the original copy to the agent if you’d like it to take immediate effect, and keep a copy for your own records. Alternatively, hold onto the original until you’d like it to take effect.
  5. How is “incapacity” determined?
    It’s important to identify a specific event, such as when your doctor certifies you are no longer able to handle your own affairs. In a legal document as important as this, you don’t want to leave anything open to interpretation.
  6. What does a durable power of attorney (POA) do?
    You can assign your durable power of attorney to do as much or as little as you choose. People generally give extensive power over their finances and expect their agent to keep accurate records and keep their own affairs separate, to avoid conflicts of interest. Some commonly assigned powers include:
    * Making critical decisions about your health care. You may want to consult an elder law attorney to create a living will, which outlines your wishes if you become terminally ill and unable to consent to or refuse medical treatment.
    * Handling your finances. A durable power of attorney can make bank transactions, pay your bills, attend to tax matters, fill out insurance and benefits paperwork, use your assets to cover your everyday expenses, collect Social Security, Medicare and other federally issued benefits, invest your money, file your taxes and manage your retirement accounts.
    * Managing your property. A revocable living trust outlines how you’d like your property to be managed and distributed in the event of your death. Your durable power of attorney administers property not outlined in the trust only in the event of your incompetence. If you don’t have a revocable living trust, you could assign this responsibility to your agent.
    * Acting on your behalf with third parties. Companies you do business with, such as your electric and credit card companies will be hesitant to speak with anyone else besides you about your accounts, even if it’s someone to whom you’ve given legal power to act on your behalf. By providing a letter of attorney, your agent will be able to communicate with these companies without any question as to their authorization.
  7. Are there disadvantages to having a durable power of attorney?
    Some parties may not recognize your durable power of attorney, especially if it’s over a year old, because it’s not issued by the court. Furthermore, you cannot compel anyone to honor it without taking legal action. You should re-sign the document on an annual basis to keep the record current. Another drawback is the revocation process—revoking your power of attorney can be complicated if the agent has distributed copies to multiple third parties.
  8. How can you revoke a durable power of attorney revoked?
    * You can change your mind at any time, for any reason, as long as you are of sound mind. You’ll need draft and date a statement of revocation that includes your name, a statement of your competence, the date you initially drafted the power of attorney, the name of the person you assigned as an agent, and your signature. You can also use this form to revoke your letter of attorney and appoint another agent at the same time. Distribute the revocation to the initial agent and any third parties with whom the he or she has dealt.
    * The court can invalidate the document if it determines you to have been incompetent when you signed it.
    * If your spouse is your agent and you get divorced, the power of attorney terminates immediately.
    * If not revoked, your durable power of attorney will terminate when you die.
  9. What are my alternatives?
    If you do not want to choose a power of attorney, a guardian or conservator may be granted by probate court. In this case, you do not have a choice as to who handles your affairs, but you can trust the court will closely monitor their actions. There is no guarantee, however, that the conservator will act according to your wishes. Another disadvantage is the potential for embarrassment—after all, the details of your incapacitation will be exposed in a public proceeding.
  10. Can my agent abuse the power of attorney?
    The potential for fraud, unfortunately, is vast. Embezzlement and unlawful gifting are common, and sometimes, agents deplete the majority of the principal’s estate, change beneficiary designations on life insurance and annuities or open bank accounts with joint titles. If you have reason to believe your attorney-in-fact has abused his or her powers, you may have grounds to sue for return of property and assets and monetary damages. If your beneficiaries discover the abuse after you’ve passed, they may be able to sue for a number of causes of action.Now that you know the basics, this may be a great opportunity to take action. After all why put off until tomorrow what you can take care of today?

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