What is a Power of Attorney?
A Power of Attorney is a legal document in which you grant legal authority to a third party to act on your behalf. Oftentimes, a Power of Attorney refers specifically to a Financial Power of Attorney (appointing an agent to make financial decisions), rather than a Power of Attorney for Health Care (appointing an agent to make medical decisions).
This document is distinct and operates independently of a trust. A person acting as a trustee does not have any legal authority to make personal financial decisions for you--such as obtaining a reverse mortgage if necessary. This also includes authority to engage personal contracts on your behalf, such as with a care facility or medical provider whereas an agent under a Power of Attorney would have the ability to make those types of decisions.
A. Should I have a Durable or Non-Durable Power of Attorney?
A power of attorney for estate planning purposes should be durable, which means that it remains effective even if you become incapacitated. This is ideal in an estate planning context because the purpose for your estate plan is generally to take effect upon your becoming incapacitated.
If your power of attorney is not durable, if you become incapacitated, then the power of attorney will no longer be effective.
B. How much authority can be granted with a Power of Attorney?
The authority granted by a power of attorney may be general or limited to your preference. If you are concerned about certain powers, you can always limit the authority granted by your power of attorney to particular types of authority.
Depending on your circumstances, you may want to limit the authority of an agent, or you may want to restrict what powers an agent may exercise.
C. What is a Springing Power of Attorney?
A springing power of attorney is simply a power of attorney which is not immediately effective, but which becomes effective upon the occurrence of some future event. The event on which it becomes effective is usually the principal becoming incapacitated.
The alternative to a springing power of attorney is an immediate power of attorney which means that it is effective upon execution and the agent may act on your behalf upon your execution of the power of attorney.
An immediate power of attorney is often advisable in the context of an estate plan because it can be difficult to establish your incapacity in certain circumstances. Moreover, the person you are placing in this role should be someone that you trust--so if you have concerns about them having immediate authority, then you should have concerns about placing this person in that position at all.
D. What is a Special Power of Attorney?
A special power of attorney (or a limited power of attorney) is a power of attorney for a specific (special) purpose, and is not a general power of attorney granting broad authority.
E. Who should my Agent be?
Your agent should be someone that you trust, and preferably someone within the same county as you. It is often difficult for a distant agent to properly assist you in your affairs.
Many people will appoint their spouse or children as an agent, however, if there is a possibility of conflict, it is best to appoint a more neutral person to this role. If you do not have any person available for this role, there are people licensed by the State of California to assist people in your situation and they are called Professional Fiduciaries.
F. Is there a low-cost option for a durable power of attorney?
Yes, there is a form referred to as a Statutory Form Power of Attorney which is printed in Probate Code Section 4401. Many online resources have replicated this document which is available at minimal cost and is fairly straightforward in its form.
While this may not be the best decision in your particular scenario, the Statutory Form Durable Power of Attorney, if properly executed, will be effective like any other power of attorney. Please be aware, however, there are certain third parties and government agencies that may not honor the power of attorney unless particular language is included in it, which is not included in the Statutory Form Power of Attorney.
G. What is the difference between a Principal and an Agent?
A principal is the person creating the power of attorney--it is the person who is appointing an agent to act on his or her behalf.
An agent is the person acting on behalf of the principal--it is the person who is appointed to act on behalf of the principal.
H. How Long is a Power of Attorney Effective?
A Power of Attorney is only effective for as long as you state in the power of attorney, or until you revoke it. Typically, a power of attorney is effective as stated in the instrument and lasts until your death (unless it is non-durable, then it would terminate upon your incapacity).
Third parties, however, may continue to work with an agent and will be protected from liability until they are informed of your death.
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If you are concerned about what type of power of attorney you may need, you should consult with one of our experienced estate planning attorneys to better understand what would be an appropriate fit for your situation.
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