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Power Of Attorney

How does a power of attorney work?

Powers of attorney allows a person to execute legal documents for another person. It is in effect a contract between the two, allowing certain actions to be taken.

Most states require that a power of attorney be notarized in order for it to have legal standing, while most do not require any registered notice of the arrangement. It is not a public document unless the power of attorney is somehow registered with government officials, such as a limited power of attorney used for a real estate transaction or a power of attorney that becomes part of a legal dispute.

A person may create a power of attorney for any length of time or scope of assignment, whether it allows their agent a one-time event or comprehensive control over all aspects of decision making.

Conferring power of attorney on a trusted individual differs from having a guardian named because guardians are chosen by the court when a person becomes unable to care for his or her own needs. Both have fiduciary duties, but a guardian is required to report to the court on a periodic basis, to provide an accounting of his oversight.

Types of the Power of Attorney

  • General power of attorney – This arrangement is unlimited in scope, but some applications may require a more specific legal permission, including for medical situations and transferring property title. This power of attorney ends when the grantor becomes incapacitated.
  • Durable power of attorney – This category must be stated on the signed agreement. By employing the term “durable” the grantor ensures that the power of attorney will remain in force through any period of incapacitation.
  • Springing power of attorney – This type of contract is so named because it is enacted at a certain time or triggered by a specific event. Oftentimes the springing power of attorney kicks in when the party becomes incapacitated.
  • Limited power of attorney – This is when legal responsibility is conveyed for a specific event or transaction and is not meant to extend for a certain period of time. A medical power of attorney, also known as a health care proxy, falls under this category. Such a surrogate is only responsible for medical decisions that the individual (grantor) is unable to make for himself.

Circumstances for the Power of Attorney

It’s common to assign power of attorney to a close relative or legal representative when one expects a transaction to take place in his or her absence, such as a delivery, or payment due. An attorney will often be given a temporary power of attorney (limited) to sign paperwork for a real estate purchase or sale or business deal.

Married couples also need a power of attorney if accounts are not held jointly as, for instance, vehicles may be in one person’s name and not both, or property acquired before marriage may remain in one spouse’s name.

Establishing a legal estate often requires naming a person with power of attorney, particularly for the elderly who may be transitioning into full-time care. That’s when a person is named their surrogate by giving power of attorney for the purposes of keeping up with bill paying, shopping, and eventually medical decisions and estate settlements. However, there is significant fraud occurring, prompting some states to adopt uniform codes for dealing with power of attorney. Indeed, about one-third of those with power of attorney for an elderly person are family members or close friends who end up abusing that position of trust, resulting in losses of $2.9 billion per year.

Avoiding abuse

Legal experts suggest having a family member periodically check bank and investment account balances when a person has power of attorney that could be abused. Banks may also allow an alert to be placed on an account that is triggered when any suspicious activity takes place or if the balance suddenly drops. Others suggest freezing lines of credit with the major credit reporting agencies in order to prevent the person with power of attorney from taking out a loan in the name of the elder.

Unfortunately, much of what takes place when a person has power of attorney goes unchecked, including draining accounts and potentially selling properties. If a person has power of attorney there may be no legal recourse under criminal law, leaving people no option but a civil lawsuit to attempt recovery of assets.

While some states have adopted uniform regulations pertaining to powers of attorney, many have significant penalties for embezzlement and elder abuse.