Power of Attorney

Listeners have written in with several questions regarding what power of attorney means, to whom you can give power of attorney, and how power of attorney and living wills intersect. Today I will discuss the basics of power of attorney.

Michael W. Flynn
3-minute read

First, a disclaimer: Although I am an attorney, the legal information in this podcast is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, I do not intend to create an attorney-client relationship with any listener.

Today’s topic is the power of attorney. Listeners have written in with several questions regarding what power of attorney means, to whom you can give power of attorney, and how power of attorney and living wills intersect. Today I will discuss the basics of power of attorney, and I’ll tackle living wills next week.

A power of attorney is simply a document giving one or more persons the power to act on your behalf. You, as the person who signs the power of attorney, are called the principal. The power of attorney gives legal authority to another person, called an agent or attorney-in-fact, to make property, financial and other legal decisions on your behalf. The agent does not have to be an attorney at law; your agent can be any competent adult. Your agent generally owes you a duty to act solely for your benefit, and avoid self-dealing.

In many states, a power of attorney can be oral, while other states require a power of attorney to be in writing. Some states, such as New York, even require that a power of attorney be signed before a notary public. For those states that allow oral power of attorney, that power is typically limited by the equal dignity rule. That rule is a principle of law that requires an authorization for someone performing certain acts for another person to have been established with the same formality as required for the act the representative is going to perform. This means, for example, that if you authorize someone to sell your house, and the law requires a contract for the sale of real property to be in writing, then the authorization for the other person to sign the sales contract and deed must be in writing too.

There are several kinds of power of attorney. The broadest is the durable power of attorney, which enables your agent to act for you until you die, even if you are rendered mentally incompetent or physically unable to make decisions. A durable power of attorney typically allows your agent to make any legal decision for you. That power exists once you and your agent execute the agreement. A durable power of attorney remains in effect until you revoke it or until you die.

A nondurable, or special power of attorney, grants the agent power for a specified purpose or for a specified period of time. This is often used for a specific transaction, like the closing on the sale of your house, or the handling of your financial affairs while you are traveling outside of the country. In many states, a nondurable power of attorney will often lose force if you become incapacitated.

Last, a springing power of attorney becomes effective at a future time. It springs up upon the happening of a specific event, such as illness or disability.

There are two main advantages to having a power of attorney. First, a power of attorney can be very convenient. For example, imagine you are moving to Chicago, but do not have the time to apartment hunt. You could ask a friend who lives there to look for you, and give power of attorney for the sole purpose of signing a lease. Spouses often grant power of attorney to each other to sign each other’s checks or property deeds so that only one needs to be present to sign important documents.

Second, medical planning. While not pleasant to think about, it is possible that you will become incapacitated due to injury or illness. If you do, a power of attorney might be very important. We will discuss this more next week.

But, as with any agency relationship, the potential for abuse is omnipresent. If you grant power of attorney, then that person might do serious financial damage. Your agent with the power to sign your checks might sign away your life savings and then flee the country. Your agent has no duty to provide any accounting unless you expressly mandate that he do so in the power-of-attorney document. Be very careful when you choose your agent.

Thank you for listening to Legal Lad’s Quick and Dirty Tips for a More Lawful Life. Be sure to check out all the excellent Quick and Dirty Tips podcasts at QuickAndDirtyTips.com.

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