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Power of Attorney
By Suzanne Hard and Eric Hard
A Power of Attorney refers to a document that authorizes someone to act as the agent, or Attorney-in-Fact, for the Principal, the person conveying the power. An every-day example can be found in the sale of a home, where a wife signs paperwork on behalf of a husband who is unable to attend the closing.
Oftentimes, a power of attorney is limited in scope or duration, such as for the purpose of signing documents in a specific business transaction. This type of delegation ceases to be effective upon the incapacity of the Principal. In the example above, this means that if the husband suffers a stroke, the wife may be unable to sign the closing documents on his behalf. To address this type of situation, state laws allow the creation of a Durable Power of Attorney (DPOA), which can remain intact even if the Principal becomes mentally or physically incapacitated.
A DPOA can be a useful component of an estate plan, because it is a relatively simple document to execute, and, should you become ill, a trip to probate to appoint a conservator will not be necessary to handle your financial affairs. There will already be someone in place to act as your legal proxy. Without a DPOA, when someone becomes disabled or incapacitated so that they can no longer conduct their affairs independently, it may be necessary to go to probate to apply to have a conservator appointed. This process can be time-consuming and expensive and requires notice to heirs and an opportunity for them to participate or even object to the application. If a Durable Power of Attorney is in place, such a contest may be avoided.
The scope of the power of attorney can be delineated in the document that is used to create it. The powers may be confined to a limited time, such as while one is away, or to specific purposes, such as completing a particular business transaction. Alternatively, the instrument may be drafted to convey broad authority, including the power to sign checks, enter contracts, purchase or sell real estate, deposit or withdraw funds, create trusts, conduct business operations as necessary, and to make gifts and other transfers of property. The Attorney-in-Fact stands in a fiduciary relationship to the Principal, must always act in the best interests of the Principal, and must not violate that trust.
In drafting a power of attorney of any type, it may be a good idea to include one or more successor agents. Also, if considerable effort will be required from the agent, one can include reasonable compensation for the attorney-in-fact’s services. Of course, any type of power of attorney will cease upon the death of the Principal.
A DPOA can be useful in joint ownership of real estate. Even though the property may be owned with right of survivorship, one owner may not act for the other in the case of incapacity. Only the legal representative of the disabled owner may act for that owner; and, if there is no DPOA, then the remaining joint owner must go to Probate court and have a conservator appointed to conduct transactions with respect to the property. A prior-executed DPOA allows the attorney-in-fact to act for the incapacitated owner without seeking the permission of the Probate Court.
A Durable Power of Attorney can also be established specifically for health care decision-making. This is a good accompaniment to a living will, which addresses the declarant’s wishes regarding the use of artificial means for prolonging life. A Health-Care Durable Power of Attorney (or Appointment of Health Care Agent) appoints someone to make health care decisions for you should you become incapacitated. This type of power of attorney is often called an Advance Health Care Directive, or a Health Care Proxy.
If a Principal owns real estate out of his or her state of domicile, it is a good idea to execute a DPOA in the state of the property location as well, as a power of attorney executed in one state may not be enough to allow an attorney-in-fact to conduct business regarding property located in another state.
Of course there are risks to delegating this kind of power to another individual, so consumers should do so only after careful consideration. While the attorney-in-fact is obligated to act in your interest and will be held by a court to fiduciary standards, one should only delegate these powers to someone who is fully deserving of such trust. The DPOA document can be held by the drafting attorney until such occasion as the principal becomes incapacitated and then delivered to the attorney-in-fact. Because possession of the signed document is necessary to exercise DPOA power, such an arrangement may provide a degree of protection and reassurance to the principal.
A power of attorney can be a useful tool in many situations. As always, consult your attorney for advice on how this legal document may benefit you.
Suzanne Hard is a lawyer residing in Avon, CT. Eric Hard is an attorney with the Law Firm of Cohen, Burns, Hard and Paul in West Hartford, CT. Eric and Suzanne may be contacted at email@example.com, or at 860-561-4961.
Copyright 2007 by Suzanne and Eric Hard. All rights reserved.