Power of Attorney is a legal document that allows a person (known as the principal) to select another person or organization (called the agent) to have control of their affairs should the person who issued the power of attorney become unable to do so. There are different types of power of attorney, including general, health care, special and durable power of attorney. All of these types carry with them the same concept that the agent will be given control of a person’s affairs, the condition which differs, however, is what the agent will specifically have control over. A power of attorney is an important part of any estate plan for several reasons but the most prevalent is that it helps avoid any additional cost and state intervention if the person in question becomes mentally incompetent of handling their affairs.
Exploring the Different Types of Power of Attorney
As aforementioned, the different types of power of attorney dictate which matters the agent will take control of when the principal becomes incapacitated. The broadest of these is general power of attorney, which covers a score of different responsibilities should the principal become unable to handle these matters. Some of the powers received by the agent are financial in nature, including the buying and selling of real estate, purchasing life insurance, handling transactions involving United States securities (like municipal bonds). The agent also has some pertinent responsibilities that come along with general power attorney for the principal such as filing his or her tax returns and exercising stock rights (receiving quarterly and annual reports and voting on behalf of the principal).
Health Care Power of Attorney is a different granting of power that mainly focuses on the medical care a principal will receive. Due to the nature of some conditions such as Alzheimer’s and dementia to render the afflicted incapable of making rational decisions, the health care power of attorney is seen by many as an important part of an estate plan. The health care power of attorney would also become valid when the principal is rendered unconscious like by a coma, whether medically induced or not. There are certain parts of the health care power of attorney which can be outlined beforehand so that the principal’s wishes are ultimately met in instances such as life-sustaining procedures. The principal will also remain as the first power in matters over health care as long as they are able to do so under informed consent and are deemed mentally capable. It is only when either of these conditions cannot be met that the power over these decisions falls on the designated agent(s).
Special Power of Attorney has the unique property where the principal can decide exactly which powers the agent will have when he or she becomes incapacitated. It is essentially the “a la carte” power of attorney to make it easier to remember. The principle, when crafting the special power of attorney with a lawyer, will designate which duties that the agent can have control over. These can include any of the powers given by a general power of attorney; however the principal will pick and choose which will apply to the agent.
Finally, there is durable power of attorney, which actually isn’t a specific type of power of attorney at all. Having durable power of attorney means that the agent will receive the powers granted to him or her when the principal becomes mentally incapacitated. Without this clarification, the power of attorney becomes null and void when the principal is deemed mentally incompetent of managing his or her affairs. This is important to note as the chance of mental competency is often one of the main reasons that people make a power of attorney in the first place, however without this small detail can derail a meticulously crafted power of attorney.
Conditions in Creating a Power of Attorney
When establishing a power of attorney document, there are a few conditions that must be met in order for it to be legally binding. First and foremost, the principal must be deemed mentally competent at the time of creation and signing of the power of attorney. If the mental status of the principal is in question, a physician might be contacted in order to affirm the condition of the principal. Once the principal is deemed mentally competent and signs the power of attorney, his or her signature must be notarized. Like many other legal documents, the signature must be notarized in order to confirm the legitimacy of the original signature. It also doubles as a way for the document to be recorded and used in real estate dealings. Once these conditions are met, the power of attorney becomes a legally binding document for both the principal and agent and can only be undone by the principal when mentally competent by revoking the power of attorney. The Power of Attorney also terminates upon the principal’s death.
There are more details that can go into a power of attorney document, and this merely serves as an overview of the topic. For more information about power of attorney, or if you would like to start an estate plan for yourself or a loved one, please contact Mikel J. Hoffman, P.C., at (631) 661-2121 or fill out the contact form. We look forward to speaking with you and assisting you with anything you may need.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding creditors or any federal or state tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation and estate planning.