One of the most commonly employed estate planning devices is the Power of Attorney. This document generally comes in two varieties; a financial agency and a health care agency. At its basic, the document allows a competent individual (the Principal) to appoint another (the Agent) with the power to make legally binding decisions for him/her in the event the principal cannot make decisions for themselves. In this way, the principal can be assured, whether in financial or healthcare matters; that a trusted, hand-picked, individual will get involved if needed. For instance, a power of attorney may give the agent the ability to sign a mortgage for the principal, buy and sell securities, or consent to certain medical treatment.
Historically, a document authorizing another to act on one’s behalf had tremendous utility. In a world where people could not travel easily, could not converse by telephone, and could not send or receive documents electronically, the ability to appoint another was particularly useful. Under common law, this relationship was limited to acts specifically authorized, and only when the principal remained alive competent in their own right. It was an undisputed principal of law that one who cannot contract himself cannot authorize another to contract for him. Therefore, upon the death or disability of the principal, the power of attorney would become ineffectual.
Nowadays, most states have adopted “durable” power of attorney legislation which, in contrast to common law, allows the authority of appointment to persist past the incompetence or disability of the principal. The document is “durable” in the sense that even if the principal himself cannot contract, the agent may continue on his behalf. Typically, this consists of interacting with medical care providers, or beginning to wind down the financial estate of a disabled principal. This widely used method provides for a relatively inexpensive alternative to court appointed guardians or conservators and has made the power of attorney the estate planning tool that it is today. Recognizing that at some point failing health might prevent them from handling things themselves, most of my clients are comforted by this sort of planning.
While durability is comforting, it is controlled by state law and is not absolute. For example, below is a list of decisions that an agent will not be authorized to make absent specific direction to the contrary in a legally enforceable agency document.
Therefore, if a Power of Attorney appeals to the prospective client, an attorney should be consulted regarding the appropriate drafting of the document.
-Evan Jones, Attorney
Disclaimer: This article and blog are intended to inform the reader of general legal principles applicable to the subject area. They are not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.
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