What is a power of attorney?
By definition a power of attorney (POA) is a legal document you (grantor, principal or donor) can use to designate and authorize a person of your choosing (agent or attorney-in-fact) to manage financial and legal matters in your name. A power of attorney documents legally allows the person that you have authorized to handle important matters in your name, such as managing your investments or making sure your bills are paid if you can’t do that yourself. Another option is a durable power of attorney (DPOA) which has mostly the same function, with the difference that a DPOA is effective even in if you become incapacitated.
Legal Requirements for a Power of Attorney
In order to have a valid power of attorney the law requires two conditions to be met:
Soundness of Mind – The first requirement means that you need to be mentally competent when you are signing the document, understand what you are signing and what that document does. You also need to be doing this by choice and without being pressured by anyone.
Witnesses – The second requirement comes to make sure the first one is satisfied, by requiring your signature on the document to be notarized or witnessed by at least two adults, unrelated to you and each other, which are not named as agents by the power of attorney document.
Additionally, North Carolina, South Carolina and a few other states require you to record the power of attorney with your county recorder’s office.
Married Couples and Power of Attorney
Have ever wondered what would happen if you had an accident and you ended up into a coma? Who will handle your property or your money? And more important, who will handle your health and make all the important decisions? Generally, the spouse has the legal right to deal with these aspects, but this is not always true and generally not unlimited.
Your spouse for example does not have complete control over joint-owner property. He or she needs your written consent if the situation requires him or her to sell assets, which might be impossible if you are incapacitated and your treatment or other situations require additional money.
A solution to this type of problems that may arise is to create a power of attorney for your spouse. It is a legal document you can use to allow a person you trust (agent or attorney-in-fact) to handle legal, financial and medical problems in your name in case you are not able to do so.
When you write the document you need to specify when it will become effective (e.g. if you are medically incapacitated, out of the country, unable to communicate etc.) and what your spouse can and cannot do by having that document (e.g. just to sell or buy assets or full authority).
There are more types of power of attorney documents. The ones authorizing agents to make decisions regarding financial matters such as property or money are called financial power of attorney. If the document is focused more on healthcare decisions, then it is called healthcare power of attorney.
Putting a Power of Attorney into Effect
A power of attorney becomes effective as soon as you sign it or when a doctor certifies you have become incapacitated („springing“ power of attorney).
Ending a Power of Attorney
A general power of attorney ends whenever you decide. In the case of a durable power of attorney, it ends by default at your death and it does not authorize your agent to deal with things like funeral arrangements or debts after you die.
Besides these situation, a power of attorney will end when:
- You revoke it and you can do that whenever you want while you are mentally competent.
- A court invalidates it, which rarely happens, usually in cases where a court finds that you were pressured to sign it or you were not mentally competent when you signed it.
- You get a divorce and your ex-spouse is the agent under that specific document (in states such as Alabama, California, Colorado, Illinois, Indiana, Minnesota, Missouri, Pennsylvania, Texas, and Wisconsin).
Revoking a Power of Attorney
The power of attorney can be revoked at any moment as long as the person that has granted it is mentally competent. As the document itself, the revocation needs to be done in writing and signed in front of a notary public. You also need to ensure its delivery to the attorney-in-fact and any third parties with whom he or she has been in contact, and to register it at your county recorder’s office, if your power of attorney document has also been registered there.
Financial Powers of Attorney
As the title says a financial power of attorney offers you the possibility to designate a person with the authority to act in your name, in some or all of your financial matters. You can limit the authority given to your representative to one financial transaction or specific types of transactions. This type of legal document is generally used when you have numerous or distant transaction that you can’t handle personally.
Springing Power of Attorney
A particular form of power of attorney is the legal document named springing power of attorney which is a financial power of attorney that becomes effective only when the principal becomes incapacitated, physically or mentally. This legal document allows you to have a power of attorney in place in case you ever need it, but without giving the agent authority before that moment.