UNDERSTANDING POWERS OF ATTORNEY
(Originally Published October 2013)
WHAT IS A POWER OF ATTORNEY?
Some times in life, we want to give another person the legal authority to make decisions for us when we cannot make the decision ourselves. The document that is used to do this is called a “Power of Attorney”… essentially authorizing someone to act as our “Agent”. The person granting this power is called the “Principal”.
WHAT POWERS DOES THIS AGENT HAVE?
Your Agent under a Power of Attorney has as much or as little power as you choose to give them and that generally is determined by why the power is being given. Some forms are called: “Limited or Special Powers of Attorney”. For example, if you are buying a home and the escrow signing is scheduled but you suddenly have to leave the Country on business, you can designate someone to sign those documents on your behalf. Other times, the power may be broader and longer lasting. An example of this is a real estate property management agreement where you designate someone to make most of the decisions concerning the property including the handling of your related money. The power of attorney used in Estate planning is very similar and is called a Power of Attorney for Estate Management. This however is typically considered a “General Power of Attorney” and is intended to last as long as the Principal is alive or until it is revoked. This grants the Agent the authority to make all decisions concerning the Principal’s property and financial affairs.
In all such documents you are granting your Agent the power to act as your Fiduciary. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. Generally this involves the handing of money or assets of value. A fiduciary is required to exercise the highest duty of care and loyalty and to not put his own personal interests ahead of this of the Principal.
WHEN DOES THE POWER OF ATTORNEY TAKE EFFECT?
Generally powers of attorney take effect as soon as they are signed since they are addressing an immediate need. However, in Estate Planning, the right of the Agent to exercise the powers generally does not take effect until the occurrence of some event, usually the incapacity of the Principal. …read more