A power of attorney document allows an individual to designate a person or organization to manage his affairs while he is unable to do so. The designated person or organization is called an “Agent” or “Attorney-in-Fact.”
A power of attorney document can come in many varieties. Mullaney & Mullaney is here to help explain each type and which may be the best fit for each situation.
Types of Power of Attorney
General Power of Attorney
A general power of attorney is open-ended and grants substantial power to its appointee. Types of power included in this document are:
- Managing banking transactions
- Opening safe deposit boxes
- Managing U.S. securities transactions
- Selling and purchasing property
- Buying life insurance
- Settling claims
- Signing contracts
- Buying and selling stocks
- Purchasing, selling, and managing property
- Filing taxes
- Managing government benefits matters
The following additional powers are optional:
- Operating a business
- Making gifts
- Employing professional assistance
- Initiating transfers to living trusts
- Disclaiming interests
A general power of attorney allows an individual’s agent to handle all of his or her affairs when he or she cannot do so. People traveling out of the country or persons physically or mentally unable to handle their affairs may obtain a power of attorney document. This document is often included as part of an estate plan.
Special Power of Attorney
A special power of attorney grants specific powers to a person’s agent. An agent may be authorized to sell that person’s house or car, for example.
Common functions performed by a special power of attorney include:
- Managing banking transactions
- Entering safe deposit boxes
- Managing U.S. securities transactions
- Collecting debts
- Selling real estate
- Mortgaging real estate
- Managing real estate
- Selling personal property
- Borrowing money
- Managing a business
- Handling government benefits issues
- Making financial decisions
- Making estate planning decisions
This type of power of attorney is also used to allow an agent to handle specific situations when an individual is unable to do so. A special power of attorney may be used when a person traveling outside the state or country, or if someone is experiencing health problems.
Health Care Power of Attorney
This document allows the designated agent to make health care decisions on behalf of an individual if that person is mentally incompetent, unconscious, or otherwise unable to make those decisions. In many states, this document includes the individual’s wishes regarding “life-sustaining procedures” if that person becomes terminally ill or permanently comatose. Even if the document includes those wishes, each individual should carefully discuss his or her wishes with his or her agent.
A health care power of attorney differs from a living will in that it allows an agent to make health care decisions on behalf of another person. A living will only allows a person to express his or her wishes concerning life-sustaining procedures.
Health care powers of attorney and living wills are considered “advance health care directives” because instructions are being given in the event an individual is unable to make health care decisions in the future. Some states have a separate “advance health care directive” which combines elements of a living will and a health care power of attorney.
Health care powers of attorney do not take effect until an individual is unable to give, withdraw, or withhold informed consent regarding his or her healthcare.
Durable Power of Attorney
This document is a general, special, or health care power of attorney containing special durability provisions. If an individual becomes mentally incompetent while a power of attorney is in effect, the durability provision allows the document to remain in effect.
A durable power of attorney can also be used to prepare for mental incompetence due to an illness or accident. The document does not become effective until a doctor certifies an individual is mentally incapacitated.
An agent can be anyone an individual trusts. This agent must be trustworthy because he or she will be making decisions regarding that person’s financial and health care concerns.
Agents are typically only held responsible for intentional misconduct and not for unknowingly making an error. This protection is included in powers of attorney documents to encourage people to become agents. Agents also most often serve without compensation.
Additional Information
Successor Agents
These agents are used when the appointed agent is unable to serve or refuses to serve.
Mental Competence
An individual must be competent when signing a power of attorney document. This person must understand the power granted to the agent and the ramifications of having an agent make decisions for him or her. If an individual’s mental competence is questionable, it is a good idea to seek evaluation from a physician.
Signing the Document
The person granting authority must sign a power of attorney. Called the “principal,” this person must be mentally competent when signing the document in order for the document to be valid. If any question about the principal’s mental competence exists, a physician may be asked to confirm the person understands the ramifications of signing a power of attorney.
Power of attorney documents should have a notarized signature. A notarized signature is difficult to challenge and allows the document to be recorded for use with real estate transactions.