What is a Power of Attorney?
I received this question recently, “Shane, I have an ailing mother who may require some pretty extensive care in the near future. Do I need to have a power of attorney drawn up for her?”
A “power of attorney” is a legal document where a person, called the “principal,” gives another person, called the “agent” or “attorney in fact,” the legal authority to do some act or acts on the principal’s behalf. Power of attorney can be given to anyone, for anything. The scope can be narrow, like giving someone else the authority to sign a specific legal document for you on a specific day; or can be broad, like giving your son or daughter full authority over all your affairs.
Sometimes, people are confused about what a power of attorney does because of the use of the word “attorney.” Granting someone power of attorney, however, really has no connection to a lawyer (other than you should consult one to draw it up, of course). In fact, the word “attorney” actually means “a person acting for another as an agent.” An “attorney at law” is a lawyer who is acting as your attorney, or your agent in legal matters. You may grant the “power” for someone to act as your agent, or attorney, to anyone.
In estate planning situations, a person usually looks to grant a broad power of attorney to someone they trust so that if they are hospitalized, unconscious, or can’t communicate, their named agent may legally take care of their business. This kind of power of attorney is called a general durable power of attorney and should only be granted to someone in whom you have complete trust. A general durable power of attorney is very useful should you need it. In fact, largely because of today’s strict privacy policies, most banks, insurance companies, and other institutions won’t even answer simple questions about your account without one on file. Many times this means simple things like paying household bills or making loan payments can’t be done.
A general durable power of attorney can be set up as either “springing” or “sprung.” A springing power of attorney takes effect upon the occurrence of some event, like the principal’s incapacity, and is not effective before such time. A sprung power of attorney is one that is immediately effective upon the principal’s signing. Many people like the springing power of attorney because it becomes effective only when you need it.
In answer to the initial question, if you think a loved one will be in a situation where they cannot effectively communicate or take care of their affairs, you need to have that them talk to a lawyer about the benefits of a power of attorney.
This column is intended for general information purposes only. It is not intended, nor should it be construed as personal legal advice. The answers to most legal problems rely on the specific facts of your situation; therefore, it is very important that you personally see a lawyer when these situations arise.