A comprehensive power of attorney directive is an essential tool in estate planning and elder law. This voluntary delegation of authority helps clarify decisions and actions regarding financial, legal, or medical matters. In most cases, an individual establishing a power of attorney hasn’t given up their ability to perform these functions, but has granted legal authority to another individual or entity to do so on their behalf if necessary.
Power of Attorney Terms to Understand
Here’s some terminology to know as you establish a power of attorney document.
The agent under a power of attorney has traditionally been called an attorney-in-fact or sometimes just an attorney. However, confusion over these terms has encouraged the terminology to change. Now, state statutes frequently use the term agent to identify the individual receiving power by the document. To ensure you have a detailed directive that meets all your needs, it’s critical to choose an honest, reliable appointed agent and a legal partner who can help you cover every possible contingency.
This is the individual who has appointed an agent to represent them as a power of attorney.
Law of Agency
The law of agency governs the agent under a power of attorney. It refers to the body of statutes and common law court decisions built up over centuries that dictate how and to what degree an agent is authorized to act on behalf of the principal. In most states, powers of attorney can be and most often are unilateral contracts—that is, signed only by the principal, but accepted by the agent by the act of performance.
Much has been written about financial exploitation of individuals—particularly seniors and others in vulnerable positions—by people who take advantage of them through undue influence, hidden transactions, identity theft, etc.... Although exploitation risks exist, there are great benefits for the principal to privately empower an agent to act on their behalf to perform certain financial functions.
Health Care Power of Attorney
A comprehensive power of attorney may include a grant of power for the agent to represent and advocate for the principal regarding health care decisions. Such health care powers are more commonly addressed in a separate document, or combined with other topics in an advance health care directive.
A power of attorney absent of durability provisions automatically terminates upon a principal’s incapacitation. But all states have adopted a durability statute that allows principals to include in their powers of attorney a simple declaration that, if they become incapacitated for any reason, the power of attorney directive is still valid. This durable power of attorney document only ends at a stated termination date or when the principal dies.
Top 6 Reasons to Establish a Power of Attorney
Establishing a power of attorney offers many benefits. While each individual has different needs, here are some of the most important.
1. Clarifies Decisions in Advance
A comprehensive power of attorney requires considerable thought. When a parent or loved one decides to sign a power of attorney, it's a good opportunity for them to express wishes and expectations with family members, particularly the person named agent. This ensures everyone agrees from the start about vital issues such as long-term care, applying for government benefits to pay for care, choosing care providers, the details of asset allocation and protection planning, and more.
2. Prevents Questions About the Principal’s Intent
Many of us have read about court battles over a person’s intent once that individual becomes incapacitated. A well-drafted power of attorney, along with other health care directives, helps eliminate the potential for family members to argue or disagree over a loved one’s wishes: this document is excellent evidence of their intent and is difficult to dispute. So the more comprehensive a power of attorney is, the better.
3. Provides Immediate Access to Critical Assets
A well-crafted power of attorney includes provisions that allow the agent to timely access critical assets, such as the principal’s bank accounts, investments, credit cards, safety deposit boxes, and other financial assets; have the ability to continue to pay bills; and receive their income, among other functions. Without these provisions, court approval is required before anyone can access these assets.
4. Protects the Agent From Financial Abuse Claims
Comprehensive powers of attorney often allow the agent to make substantial gifts to self or others to carry out asset protection planning objectives. Without a power of attorney authorizing this, the agent (often a family member) could be at risk for financial abuse allegations.
5. Allows Agents to Talk to Other Agencies
A power of attorney agent is often able to reconcile bank charges, make arrangements for health care, engage professionals for services to be provided to the principal, and many other essential tasks. Without agent authority protection granted by a detailed power of attorney directive, many companies will refuse to disclose information or provide services to the incapacitated person. This can result in a great deal of frustration and lost time and money.
6. Avoids Court-Appointed Guardianship or Conservatorship
A power of attorney assures that the assigned agent carries out your wishes appropriately, especially if you need future assistance with financial or health issues. Without a power of attorney, the only alternative is for someone to petition the court to appoint a guardian or conservator to manage your affairs—and if you’re incapacitated for any reason, you won’t have vital input. This process can also be quite costly and time-consuming, as the court monitors your affairs for as long as you’re alive.
You and Your Family Deserve Peace of Mind
A power of attorney lessens the burden on family members who would otherwise have to go to court to get authority to perform even the most basic tasks—never mind resolving more complicated issues—on your behalf. Preparation provides great comfort to loved ones, and helps you plan for the future on your terms. Our team can explain these and other benefits in a free consultation.