Power of Attorney Tips

A power of attorney is a signed document giving another person the legal authority to act on your behalf with respect to your assets.  The person acting on your behalf is referred to as your “attorney-in-fact,” and is your agent.  You are referred to as the “principal.”

Powers of Attorney serve many purposes.  They can be narrowly tailored to specific powers or as broad as giving the attorney-in-fact the power to take all action related to your finances/assets that you would be able to do yourself.  For example, if you become incapacitated – no longer able to take care of your financial matters – then the attorney-in-fact will be able to act in ways specified in the document.  This kind of incapacity planning helps avoid guardianships/conservatorships and the related limitations, costs, time, and hassle of setting them up through the courts.  Another example – you are out of town unexpectedly and can't make it to a real estate closing or need someone to access your bank accounts.  You can make a power of attorney to authorize your agent to go to the closing, execute appropriate documents, or access your accounts in your place.

Choose your attorney-in-fact carefully and make sure it is someone you trust and someone willing to act.  There is no court supervision over attorneys-in-fact.  Unlike a trustee (of a trust), a power of attorney does not create a duty to act.  It simply gives the attorney-in-fact the power to act.  However, if the attorney-in-fact does act, they have a duty to act prudently and in your best interests.

You can have multiple attorneys-in-fact, but you should consider the pros and cons of such an approach.  For instance, by having two attorneys-in-fact that must act jointly, you create a check and balance system.  However, if they do not agree on action to take or are separated geographically, it may cause your wishes to be delayed or unfulfilled.  Another example would be to allow multiple attorneys-in-fact to act independently.  This approach could be convenient if one is out of town, but could also cause problems if they do not communicate effectively.  

Once a power of attorney is signed, it is valid and can be used.  You can control the use of the power by controlling the actual possession of the document.  Powers of attorney can be terminated by death or revocation.  When the principal dies, then the personal representative of the estate takes over.

Speak to an estate planning attorney to see how a power of attorney can help you achieve your planning goals.  Powers of attorney are fairly cheap to create, but will save significant money and hassle if utilized properly.