Estate And Trusts: Power Of Attorney
What is "power of attorney"?
A "power of attorney", which is written, confers upon a third person the power to act in legal matters on your behalf. The "power of attorney" can be a "Limited Power of Attorney"; for example, limited to representing you in one real estate transaction, or it can be a "General Power of Attorney" which, basically, says you can do anything I can do.
When is it necessary to grant power of attorney?
I see two circumstances requiring the need for a power of attorney and I would like to say, parenthetically, that I do not believe powers of attorney should be routinely prepared as part of an estate plan because there is the obvious possibility of abuse. I have prepared powers of attorney in situations where a client had a disability or was, perhaps, going to be out of the country for a while. In these situations, power of attorney is granted for the limited purpose of being represented in a sales transaction or some kind of negotiation relating to a business sale etc, or where a client is or may soon be mentally or physically incapacitated and needs somebody else to do things for him or her.
How long does "power of attorney" last?
A power of attorney can last by its terms until its expiration date. If the power of attorney says this power shall expire on December 31, 2007, it will. It can also expire when the person becomes disabled and no longer can act on his or her own behalf. Or it expires in all events upon the death of the principal who gave the power of attorney. You can avoid the second expiration - the expiration upon disability - by including language which makes the power of attorney a durable power of attorney. If that language is in there, then even if the principal has lost capacity, the agent can continue to act on the principal's behalf.
What is a "durable power of attorney"?
A durable power of attorney is a power which, by it's terms, will survive the incapacity of the principle. At common law, a power of attorney was only as good as the capacity of the person who was conferring the power. California law has adopted a durable power of attorney statute, which allows the power to continue on after disability if the power expressly so provides.
What do they call a person who has power of attorney?
A person upon whom a power of attorney has been conferred is called an agent or, especially in legal documents, is called an attorney in fact.
How can I ensure that my attorney-in-fact's decisions will be honored?
You cannot ensure your attorney-in-fact's decisions will be honoured. My experience is that institutions always prefer to have their own form of power of attorney. For example, in order to sign on the principal's checking account, what an institution will want is for the internal power of attorney form to have been completed before they will honour the agent's signature. The short answer, really, is that no power of attorney is, in and of itself, bulletproof, or bound to be honoured.
At what point in time is the power granted to the attorney-in-fact?
A power of attorney for assets can be drafted to confer the power to act immediately, or upon the occurrence of some event. That second power is called a "springing" power of attorney. Typically, the event that must occur is the disability of the principal and a written statement to that effect by two doctors, and the definition of who the doctors are could be unique to any particular document. The benefit of the springing power is that it protects the principal from an agent or attorney-in-fact who decides to act on his own when he really shouldn't be and there's no need to be. The problem with the springing power is that if you really need to have the power executed now, you can't do so because you have to jump through some hoops before the agent will actually have the power conferred.
What is guardianship?
Guardianship is a formal proceeding instituted in the probate court by which individuals will apply to be appointed as guardians of the person and/or the estate of minors (children). The guardianship is court supervised and as a result the guardian, once appointed, has to report to the court on an annual or biennial basis concerning his or her activities on behalf of the minor and has to account to the court if there is estate that the guardians are managing on behalf of the minors. It is an expensive process but ideally it ensures that the minors, persons, and estates will not be abused.
Can I cancel a "power of attorney"?
You may revoke or cancel a “power of attorney” at any time. That said, I have to add that the problem is more complex if the agent already has a copy, or the original, of the “power of attorney” because although the principle can revoke the “power of attorney” by executing a new one or by executing a revocation, a third party might be unaware of the existence of that revocation and may honor the agent's activities even though the agent is no longer the agent. What we try to do to minimize that possibility is by retaining in our office the original “power of attorney,” giving to the principle, the person who signed the power of attorney, a copy. And that copy shows that we hold the original. Giving a copy to the agent may still be something that the principle has to do, but that copy too would show that we held the original. And if the agent were attempting to exercise the power at an institution or wherever, and we were aware that a revocation had been made, there is at least some likelihood that the institution might call our office and say “is this ‘power of attorney' still in effect?” The revocation, in a word, is “tenuous”. But it can be done.
How do I choose an attorney-in-fact?
Your power of attorney agent is supposed to act on your behalf and is supposed to be in your shoes for financial and management purposes. Therefore, it seems as though the person should be both capable of acting on your behalf, and trustworthy. As trustworthy as you would be to yourself.
