Power of Attorney

A power of attorney is a document that allows you to appoint a person or organization to handle your affairs while you're unavailable or unable to do so. The person or organization you appoint is referred to as an "Attorney-in-Fact" or "Agent."

General Power of Attorney - authorizes your Agent to act on your behalf in a variety of different situations.

Special Power of Attorney - authorizes your Agent to act on your behalf in specific situations only.

Health Care Power of Attorney - allows you to appoint someone to make health care decisions for you if you're incapacitated.

"Durable" Power of Attorney -The general, special and health care powers of attorney can all be made "durable" by adding certain text to the document. This means that the document will remain in effect or take effect if you become mentally incompetent.

Revocation of Power of Attorney - allows you to revoke a power of attorney document.

General Power of Attorney

A general power of attorney is very broad and provides extensive powers to the person or organization you appoint as your agent. These powers usually include:

• Handling banking transactions
• Entering safety deposit boxes
• Handling transactions involving U.S. securities
• Buying and selling property
• Purchasing life insurance
• Settling claims
• Entering into contracts
• Exercising stock rights
• Buying, managing or selling real estate
• Filing tax returns
• Handling matters related to government benefits

You also have the option to grant the following additional powers to your Agent:

• Maintaining and operating business interests
• Employing professional assistance
• Making gifts
• Making transfers to revocable ("living") trusts
• Disclaiming interests (this has to do with estate planning strategies to avoid estate taxes)

A general power of attorney is usually used to allow your agent to handle all of your affairs during a period of time when you are unable to do so. For example, when you are travelling out of the state or country or when you are physically or mentally unable to handle your affairs. A general power of attorney is frequently included as part of an estate plan to make sure that you have covered the possibility that you might need someone to handle your financial affairs if you are unable to do so.

Special Power of Attorney

A special power of attorney allows you to give only specific powers to the person or organization you appoint as your "Agent." For example, you could authorize someone to sell a car or a house for you.

Many people use the special power of attorney to authorize their Agent to do one or several of the following:

• Handle banking transactions
• Enter safety deposit boxes
• Handle transactions involving U.S. securities
• Collect debts
• Sell real estate
• Mortgage real estate
• Manage real estate
• Sell personal property
• Borrow money
• Manage business interests
• Handle government issues
• Make financial decisions
• Make estate planning decisions, including gifts

A special power of attorney is often used to allow your Agent to handle specific situations for you when you are unavailable or unable to do so. For example, you may be travelling outside the state or country, or you may be unable to handle a specific situation because of other commitments, or health reasons.

Health Care Power of Attorney

A Health Care Power of Attorney is a document that allows you to designate a person (an "Agent") who will have the authority to make health care decisions on your behalf if you are unconscious, mentally incompetent, or otherwise unable to make such decisions. In many states you can also express your wishes regarding whether you wish to receive "life-sustaining procedures" if you become permanently comatose or terminally ill, in the Health Care Power of Attorney document. This will help your agent to know your wishes as he or she makes decisions for you. Even if you do include this in the document, you should still discuss the Health Care Power of Attorney with the Agent, expressing your wishes, values and preferences regarding health care.

A Health Care Power of Attorney is different from a Living Will because it allows you to appoint someone to make health care decisions for you. A Living Will only allows you to express your wishes concerning life-sustaining procedures.

Both Living Wills and Health Care Powers of Attorney are considered "Advance Health Care Directives" because you're giving instructions on what you'd want to happen in the event that you become unable to make health care decisions in the future. Some states also have a specific "Advance Health Care Directive" document that combines elements of a Health Care Power of Attorney and a Living Will. (For a more in-depth look at Advance Health Care Directives, Health Care Powers of Attorney and Living Wills, click here.)

Even if you have executed a Health Care Power of Attorney, you still have the right to give medical directions to physicians and other health care providers as long as you are able to do so. This document only becomes effective when you do not have the capacity to give, withdraw or withhold informed consent regarding your health care.

Durable Power of Attorney

A "durable" power of attorney is actually a general, special or health care power of attorney that contains special durability provisions. If you become mentally incompetent while you have a power of attorney document that's already in effect, a durability provision will allow the document to stay in effect.

You can also sign a durable power of attorney document to prepare for the possibility that you may become mentally incompetent due to illness or an accident. In this case, you would specify that the power of attorney wouldn't go into effect unless a doctor certifies that you are mentally incapacitated.

You don't have to choose a lawyer to be your agent, but it is important to select someone you trust. The relative, friend or business you choose to be your Agent will be acting on your behalf regarding your financial or health care issues. You need to choose someone who won't abuse the powers you grant to them and will look out for your best interests.

In general, an agent is only held responsible for misconduct that's intentional, not for unknowingly doing something wrong. This type of protection is included in most power of attorney documents to help encourage people and organizations to accept the responsibility of being an Agent. Usually there is no financial incentive to serve as an Agent, most serve without compensation.

Successor Agents

There is always the possibility that the person or organization you appoint as your Agent either won't be able to serve or will refuse to serve. That's why you have the option of appointing a Successor Agent who can take over as Agent if necessary.

Here is an illustration of why appointing a Successor Agent is a good idea: An elderly husband names his elderly wife as his Agent. After signing the power of attorney document, they are both diagnosed as having Alzheimer's disease. The wife becomes mentally incompetent and can't serve as her husband's Agent. The husband is also mentally incompetent and can't sign a new power of attorney. If the husband had named a Successor Agent, he or she could have taken over as Agent.

Mental Competence

In order for a power of attorney document to be valid, you must be mentally competent when you sign it. This means that you must understand the powers that you are granting to your Agent and the implications of having someone else make decisions for you. If there is any question about your mental competence, it's a good idea to have a physician evaluate you and state in writing that you are competent.

If you have signed a "durable" power of attorney document, it will either remain in effect or go into effect if you become mentally incompetent. But how will your mental competence be determined? This is something that you can spell out in the document. For example, you can name a physician whom you wish to make the determination. Or, you can require that two licensed physicians agree on your mental capacity.

Even if your document doesn't set specific requirements, it's still likely that your Agent will have to get a doctor's written confirmation of your incompetence. Most businesses and organizations won't allow your Agent to act on your behalf without it. In some cases, a court may be required to decide the issue using generally accepted standards.

How does a doctor decide if you're mentally competent? In general, the doctor will consider whether you have an understanding of the subject area covered by the Power of Attorney, whether you understand the implications and importance of the matters involved, and whether you can make and communicate reasoned choices.

Signing the Document

A power of attorney must be signed by the person granting the authority (known as the "Principal"). The Principal must be mentally competent at the time of the signing in order to make the document legally binding. If there is any question about the Principal's mental competence, a physician may be asked to certify in writing that the person understands the document and the consequences of signing the document.

The signature on a power of attorney should also be notarized. Notarization makes it harder for someone to challenge the validity of the signature. It also allows the document to be "recorded" for use with real estate transactions.