February, 2003

Power of Attorney

Okay, the last two months we talked about wills and health care proxies, so we should round it off into a three part series on basic estate planning discuss the Power of Attorney (POA).

The POA is very simple.  It authorizes a trusted friend to do anything you could do, if you are unavailable to do it yourself.  Your unavailability can be for almost any reason, from being out of town to being permanently incapacitated.  The only reason which won't work is that you died.  A POA automatically terminates upon your death.  After that, your Executor manages your affairs.

A POA can be limited to a specific task (e.g. "to sell my house under the attached P&S Agreement."), or it can be very broad in it's grant of powers (i.e. " To exercise or perform any act whatsoever that I now have or may hereafter acquire . . .").  However, even if it is broad in nature, it is a good idea to include a wide range of specific examples.  This is because some places will not recognize a POA unless it specifically applies to their situation.  For example, a bank may not accept your POA if it doesn't specifically state that your "Attorney" is authorized to access and manage your bank accounts.

Unless stated otherwise, a POA is effective from the time you sign it, and remains valid as long as you are alive and competent.  But you can tailor this to fit your preferences.  For example, a Durable Power of Attorney remains valid through any periods of disability or incompetence you may suffer.  This is the most common type of POA because that is the primary reason people have them drafted: to allow someone to manage their affairs if they were incompetent to do it themselves. 

Another way to tailor your POA is to make it a Springing Power of Attorney, which won't become effective unless and until you actually become disabled.  In this situation, your Attorney will be required to produce medical evidence of your disability prior to acting.  This is good if you want to restrict their ability from messing with your affairs until absolutely necessary.

And this raises a final and important point about the POA; which is to only appoint someone you trust completely.  Once he or she has that signed document, it is difficult for you to reign it back in.  And if you have to revoke it, make sure you notify all your credit card companies, banks and other businesses that affect you.