What is a Power of Attorney?
A Power of Attorney (“POA”) is a document someone signs (the “principal”) giving someone else (the “agent”) authority to do things the principal could have done if he or she was able. There are two types of Power of Attorneys that people think about. First is the Healthcare Power of Attorney. This allows the agent to make healthcare decisions for the principal if the principal was to become incapacitated and unable to make his or her own decisions. A Durable Power of Attorney allows an agent to financial and other decisions on behalf of the principal if the principal were to become incapacitated. A Durable Power of Attorney allows an agent to do nearly everything the principal himself could do if he were able.
Why is it important to have a Durable Power of Attorney?
Having a Durable Power of Attorney is an important part of your estate plan because it will allow your agent under your Power of Attorney to handle your financial needs if you are unable to do so yourself. This can be very helpful in a difficult situation, and can save the time and money it takes to go to court and get an order allowing someone to act on your behalf in you are unable to do so yourself.
What is an Attorney in Fact?
Some states call an agent under a Power of Attorney an “attorney in fact”. An attorney in fact is the same thing as an agent under a Power of Attorney.
Can my agent make healthcare decisions?
An agent under a Durable Power of Attorney typically cannot make healthcare decisions. This is why it is a good idea to create a Healthcare Power of Attorney in addition to a Durable Power of Attorney.
What does the word “Durable” in a Durable Power of Attorney stand for?
A Durable Power of Attorney means it is a Power of Attorney that will continue after the principal becomes incapacitated and can no longer act for himself.
When does my Durable Power of Attorney become effective?
Your Durable Power of Attorney can become effective either immediately after you sign it or upon your incapacity. Normally most clients prefer that their POA only becomes effective upon incapacity. However, some clients who travel frequently or those in the armed forces may find that making a POA immediately effective is helpful as it allows someone back home to handle their affairs if necessary. When you create a Durable Power of Attorney, make sure you put your POA in a safe place where your agent can easily access it in the event he or she needs to use it.
What are the duties of my Agent?
Your agent owes a fiduciary duty to you. This means that he or she as a fiduciary is responsible for acting in your best interest. He or she must act reasonably and prudently and must handle your finances and other affairs separately without commingling your assets with their own.
How long is my Power of Attorney effective?
Your Power of Attorney is effective until you revoke it or pass away. Your POA will automatically be revoked upon passing and your agent under your Durable Power of Attorney will no longer have authority to act on your behalf. A Power of Attorney is not a substitute for a Last Will and Testament, and this is why it expires upon death. After death your personal representative (executor) or successor trustee will generally handle your financial matters.
I signed a Power of Attorney a long time ago. Is it still effective?
While technically your Power of Attorney should still be effective, we strongly recommend updating your Durable Power of Attorney every two years or so. This is because many institutions, including banks, do not like accepting old Power of Attorneys. With all of the authority granted to an agent under a POA, some institutions won’t honor old Power of Attorney documents because they are afraid of getting sued by the principal in the event the Power of Attorney had been revoked or was otherwise no longer valid.
Can I revoke a Power of Attorney and if so, how?
You can revoke your Durable Power of Attorney at any time during your life as long as you are competent to do so. If anyone is currently relying on your POA, be sure to notify those people that you are revoking the POA. This is why it is important to keep a list of everyone who has a copy of your Power of Attorney, so you can notify them if you change or revoke the document.
A Durable Power of Attorney is a critical part of every estate plan. Powers & Neal has a variety of estate plan packages that can be customized to suit your unique needs. Call Scottsdale trust attorney Abigail Neal at (480) 699-7992 today to schedule an appointment.