Power of Attorney is a document granting one person the ability to make decisions regarding property and possessions on behalf of another. The power of attorney document (POA) is named this because the agent can act in many ways as an attorney can. Of course, this does not mean that your agent can represent you in court or perform legal work for you, but it does mean that he or she can appear on your behalf before any private party as if you yourself were present.
The POA only lasts while you are living. After you pass, your agent will no longer have the power to make decisions on your behalf regarding property, possessions, or anything else. After death, the executor named in your will takes over and opens a probate estate.
POAs are not only for the elderly, incapacitated or infirm. A POA allows you and your spouse to have unfettered access to each other’s financial affairs, even as it relates to work-related documents such as 401K or other retirement plans. POAs also can provide for business succession or allow someone to be appointed for business purposes in the event that you are disabled temporarily or permanently. POAs also are used when a person plans to go overseas and needs someone in the United States to help children or other dependents gain access to bank accounts during that time.
In the event that someone seeks a guardianship over you, the POA also names the person to be your guardian. The courts are bound by statute to honor this choice in a POA unless clear grounds to set aside the named agent are demonstrated.
Duties of the Agent Under a POA
If you have been named as an agent under a POA, what are your duties to the principal? Generally, you have duties:
- of care
- of confidence
- of diligence
- of loyalty
- to keep funds separate
- to keep records of transactions
- to act in the best interest of the principal
This means that you cannot take the principal’s money and run off to Vegas. It also means that you cannot take all the principal’s money and invest it in a single stock or make other risky investment decisions. The POA creates an important responsibility because it allows the agent to help the principal make sound financial decisions, but the agent is also liable for poor decisions made on the principal’s behalf.
Revoking a POA
Unfortunately, POAs are sometimes abused. In the case of abuse, you can revoke the power you have given to your agent. You can do so with or without cause and at any time, but it is important to note that every action the agent has taken on your behalf will be considered ratified by you. In other words, you cannot claim that you did not authorize a specific action taken on your behalf by your agent while the POA was in effect. The POA grants that power even if it has been abused. Of course, you can sue the agent who has acted improperly under the POA; however, third parties are entitled to rely upon the POA. This is part of what makes it so powerful. No one other than you and your agent can question the validity of the document.
So why won’t the bank let me get into a bank account?
A common question we receive concerning POAs is why a bank or other financial institution would not honor the document. In most cases, this occurs because the principal has died, and the agent is attempting to access the bank account of the deceased principal. This is a common mistake and is easily solved. The executor named in the will, or the administrator if there is no will, must open a probate estate to obtain access to bank accounts and other financial assets of the deceased principal.
If you are interested in learning more about POAs or need one for yourself or someone else, contact Cornerstone Law Firm. Our experienced estate planning attorneys can help you and your loved ones determine whether a POA is right for you.