Power of Attorney
Power of Attorney (POA) is a legal arrangement that enables one individual, known as the "agent" or "attorney-in-fact," to make decisions on behalf of another individual, referred to as the "principal." This agreement is typically written and may need to be notarized or witnessed, depending on state laws. Power of Attorney can encompass a range of decisions, including financial, business, and healthcare matters. Different types of POA exist, including general, limited, healthcare, durable, and springing agreements, each specifying various powers and conditions under which the agent may act.
General POA allows broad authority for the agent during the principal's temporary inability to manage affairs, while limited POA restricts authority to specific situations. Healthcare POA is designed for medical decisions when the principal is incapacitated. Durable POA remains effective even after the principal becomes incapacitated, and springing POA activates only under certain conditions. The main purpose of these agreements is to ensure that an individual’s affairs are managed when they cannot do so themselves, thereby preventing potential disputes and ensuring clarity in decision-making. All parties involved must be aware of the laws in their state regarding the creation and validity of these agreements.
Power of Attorney
A power of attorney is a legal agreement between two individuals that grants one individual, the "agent" or "attorney-in-fact," the legal power to act on behalf of the other individual, usually called "the principal." Power of attorney agreements may be oral or written, but only written agreements are honored in some situations, and in some states, written power of attorney agreements must be notarized and legally witnessed before they will be considered valid. The agent specified in a power of attorney agreement may be authorized to make either general or specific decisions regarding issues like finance, business, or healthcare directives.
All US states have laws regarding power of attorney agreements, though laws and procedures differ between states. There are different types of power of attorney agreements, specifying the powers granted to the agent and when and how the contract comes into effect. Among the most common types of power of attorney agreements are healthcare and durable agreements, which are usually used to appoint an individual to make healthcare and other decisions after the principal becomes injured or physically unable to participate in making such decisions.
Power of Attorney Structure
A power of attorney agreement is a legal agreement between two or more parties. In general, power or attorney agreements are intended to allow the principal to appoint the agent or attorney-in-fact to make important decisions regarding financial, business, or medical issues if and when the principal is unable to do so. In cases where an individual has not appointed an agent and is unable to conduct business or make decisions, state courts may appoint an individual to serve as a guardian or representative on behalf of the principal.
In some cases and in some states, oral power of attorney agreements may be considered valid if the agreement is not subject to a legal challenge. In some states, only written agreements are accepted in the courts. In many states, standardized forms are available for assigning an agent. The federal government also has specific forms for power of attorney agreements, such as form 2848 from the Internal Revenue Service (IRS), which allows an individual to appoint an official agent for dealing with IRS processes such as filing taxes or collecting refunds.
For an agreement to be executed (to legally take effect), it must be signed and dated, at least, by the principal. States differ on whether the agent appointed must also sign and date the document. In many states, having a notary public sign and stamp the document increases the likelihood that the document will withstand legal challenges. Some states require principals to sign power of attorney documents in the presence of multiple witnesses, while other states do not require agreements to be witnessed to be considered valid.
All US states require that the principal must have the mental capacity to knowingly assign power of attorney at the time of the agreement. In addition, only certain types of power of attorney are valid if and when the principal dies or loses the ability to make decisions due to illness or injury. Unless specifically stated in the agreement, power of attorney contracts are generally considered invalid if and when the principal dies or loses capacity.
The principal is allowed to revoke power of attorney privileges at any time but may be required to cancel the agreement with a formal, written declaration for the cancellation to be valid. In many states, power of attorney agreements must be regularly and periodically renewed to remain valid, unless the agreement explicitly grants a specific term of effect.
General and Limited Power of Attorney
General power of attorney agreements can be used when the principal will be temporarily unable to conduct business or other affairs, such as when traveling out of state or out of the country. Such agreements might also be used in cases where the principal has been physically injured and is unable to attend meetings or other necessary functions.
General power of attorney agreements can specify the types of powers granted to the agent, or they may give the agent broad, unspecified powers to handle any and all personal affairs on behalf of the principal. General power of attorney agreements may be executed with a specific duration, but must usually be renewed after a certain amount of time to remain legally valid.
Limited power of attorney agreements grant powers to an agent based on a certain set of circumstances. For instance, the agreement may state that the agent can make decisions if and when the principal is not in the state or country or if and when the principal is injured or ill. Limited agreements must be carefully written so that the effectiveness of the agreement is clearly stated.
Healthcare Power of Attorney
Healthcare power of attorney agreements are specifically designed to designate an agent to make healthcare decisions in cases where the principal has become mentally incompetent, unconscious, or otherwise unable to make decisions. The agreement does not require the principal to forfeit his or her right to make healthcare decisions, and many agreements do not take effect until and unless the principal loses the capacity to make independent healthcare decisions.
Health care power of attorney agreements are often used in conjunction with living wills, which are legal documents specifying medications and procedures that an individual submits to in emergency situations. A living will can be used, for instance, to inform doctors and hospitals of an individual’s wishes regarding being placed on long-term life support after an accident. However, living wills do not specify an agent for making necessary healthcare decisions, and power of attorney agreements are often created for this purpose.
Durable and Springing Power of Attorney
A durable power of attorney agreement specifies an agent to make decisions for the principal even after the principal’s death or incapacitation. For instance, in cases where an individual develops mental illness or loses mental capacity due to an accident, a durable agreement selects an individual who can make business, financial, healthcare, or other decisions on behalf of the principal.
Durable agreements may double as healthcare power of attorney agreements if they specify that the agent has the power to make healthcare decisions. The Missouri State Bar Association, for instance, provides a standardized form for assigning an agent to perform both durable and healthcare power of attorney duties. However, the two are not synonymous, as durable agreements are characterized by the duration specified for effectiveness and not by the specific types of powers granted to the agent.
In general, durable power of attorney agreements take effect upon being signed, or executed, according to state law. The durable power of attorney remains in effect unless the principal takes steps to revoke or cancel the agreement. Durable power of attorney agreements are useful in cases where an individual wishes to appoint another individual to make long-term financial or medical decisions on his or her behalf, or when an individual is concerned that a future incapacitation might affect his or her ability to effectively make decisions on key issues.
A springing power of attorney agreement is a special type of durable agreement accepted in some US states. The springing agreement comes into effect only once an individual has become incapacitated or some other condition has been met and thereafter becomes a durable power of attorney lasting at least until the death of the principal. Springing agreements are essentially a combination of durable and limited power of attorney agreements, creating a durable agreement dependent on a certain set of conditions.
Purpose of Power of Attorney Agreements
Power of attorney agreements are intended to allow individuals to ensure that their essential business, private, or personal decisions can still be handled in cases where they are unable to do so. The specific purpose for which power of attorney is needed determines the type of power of attorney agreement used.
In addition, power of attorney agreements specify individuals who become legal agents in cases where agency may be likely to be contested. For instance, after the incapacitation or absence of a business owner, subsidiary managers may differ regarding the appropriate financial steps taken in the owner or principal manager’s stead, and a power of attorney agreement therefore specifies the wishes of the principal in his or her absence. In the absence of a power of attorney agreement, disputes regarding how to act on behalf of an individual who is unavailable or incapacitated fall to the court, and the court must decide who should act as guardian. While state laws differ on the processes needed to create power of attorney agreements, notarization and official witness statements are generally sufficient to ensure the legality of the document.
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