An important part of lifetime planning is the Power of Attorney. Valid in all states, these documents give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). The latter are "springing" Powers of Attorney. It may give temporary or continuous, permanent authority to act on your behalf. A power of attorney may be revoked, but most states require written notice of revocation to the person named to act for you.
The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact." With a valid Power of Attorney, your agent can take any action permitted in the document. Often your agent must present the actual document to invoke the power. For example, if another person is acting on your behalf to sell an automobile, the motor vehicles department generally will require that the Power of Attorney be presented before your agent's authority to sign the title will be honored. Similarly, an agent who signs documents to buy or sell real property on your behalf must present the Power of Attorney to the title company. The same applies to sale of securities or opening and closing bank accounts. However, your agent generally should not need to present the Power of Attorney when signing checks for you.
Why would anyone give such sweeping authority to another person? One answer is convenience. If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney. Another important reason to use Powers of Attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity. Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.
If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you. With A Power of Attorney, you choose who will act and define their authority and its limits, if any.
Who Should Be Your Agent?
You may wish to choose a family member to act on your behalf. Many people name their spouses or one or more children. In naming more than one person to act as agent at the same time, be alert to the possibility that all may not be available to act when needed, or they may not agree. The designation of co-agents should indicate whether you wish to have the majority act in the absence of full availability and agreement. You should name a successor agent to address the possibility that the person you name as agent may be unavailable or unable to act when the time comes.
There are no special qualifications necessary for someone to act as an attorney-in-fact except that the person must not be a minor or otherwise incapacitated. The best choice is someone you trust.
How The Agent Should Sign?
Assume Elvis Presley appoints his wife, Priscilla Beaulieu Presley, as his agent in a written power of attorney. Priscilla, as agent, must sign as follows: Elvis Presley, by Priscilla Beaulieu under POA or Priscilla Beaulieu Presley, attorney-in-fact for Elvis Presley.
Beyond Signing Checks
In addition to managing your day-to-day financial affairs, your attorney-in-fact can take steps to implement your estate plan. Although an agent cannot revise your will on your behalf, some jurisdictions permit an attorney-in-fact to create or amend trusts for you during your lifetime, or to transfer your assets to trusts you created. It is prudent to include in the Power of Attorney a clear statement of whether you wish your agent to have these powers.
Gifts are an important tool for many estate plans, and your attorney-in-fact can make gifts on your behalf, subject to guidelines that you set forth in your Power of Attorney. For example, you may wish to permit your attorney-in-fact to make "annual exclusion" gifts (currently up to $10,000 in value per recipient per year) on your behalf to your children and grandchildren. It is important that the lawyer who prepares your Power of Attorney draft the document in a way that does not expose your attorney-in-fact to unintended estate tax consequences. While some states permit attorneys-in-fact to make gifts as a matter of statute, others require explicit authorization in the Power of Attorney.
State Laws Vary
Beyond the ability to make gifts on your behalf, many aspects of a Power of Attorney are governed by state law. Generally, the law of the state in which you reside at the time you sign a Power of Attorney will govern the powers and actions of the agent(s) under that document.
Questions about Powers of Attorney
What is a Power of Attorney?
A power of attorney is a document that allows someone else to act as your legal agent. Thus, a power of attorney can be used to allow a friend to sell your car, to let your spouse talk to the holders of you accounts, or to authorize a relative to take your child to the hospital. It can also be used to sell or buy property.
Are there different kinds of Powers of Attorney?
Yes. There are three types of Powers of Attorney: general, special and durable. A general power of attorney allows the person you name (or your agent) to do any and all things that you could legally do, from registering a car to selling a house. A special (or limited) power of attorney lists a particular act that the agent is authorized to do and limits the agent to that act. The agent can, of course, be authorized to do more than one legal act in a single special power of attorney. A durable (springing) power of attorney allows your agent to manage your own personal and financial affairs, when you become incompetent, incapacitated and/or disabled, and will last as long as you are alive or until you revoke it. We typically create general springing durable powers of attorney.
What are some of the things a Special or General Power of Attorney can do?
You can use a special power of attorney to allow someone to do almost all legal actions that you can do yourself. Thus, for example, you could prepare a special power of attorney that lets your designated agent:
1. Buy or sell real estate;
2. Purchase a car or sell your furniture;
3. Register your car;
4. Sign your paycheck or withdraw money from your bank account;
5. Admit your child to the hospital for needed medical care;
6. Ship or store your car, luggage and household goods;
7. Sign your name to a lease or an agreement to connect utilities, such as electricity, gas, oil or telephone service;
8. Cash or deposit tax refund checks or transfer stocks and bonds.
Are there things a Power of Attorney cannot do?
While a power of attorney will be accepted as valid for most purposes, in California there are some items that cannot be accomplished by using a power of attorney because these actions are so personal in nature that they cannot be delegated to another. Thus, for example, a marriage ceremony or the execution of a Will cannot be done by power of attorney. In addition, there are times when a certain form of power of attorney is required and none other will be accepted – an example is the special form of power of attorney used by the Internal Revenue Service when a person allows a friend or relative to cash an IRS refund check.
All this sounds like a great idea. Why doesn't everyone have a Power of Attorney?
A power of attorney can be very useful if you have one in effect when you need it. But a power of attorney can be abused as well as used; there can be disadvantages to having one as well as advantages. A husband who is divorced from his wife might use the power of attorney she gave him to clean out her individual bank account, which is why ours expire upon divorce. A well-meaning older person might give a power of attorney to a younger relative, only to discover that the relative squandered and spent the assets of the older person. A power of attorney always has the potential for being a very helpful or a very dangerous document for those reasons. Therefore, you must exercise great care in selecting the person to be your agent.
If I decide I want to cancel my Power of Attorney, can I?
If you want to cancel or terminate a power of attorney before it expires, you can prepare and execute a Revocation of Power of Attorney. Give a copy of the revocation to any person that might deal with the person to whom you gave your power of attorney. When attempting to cancel effectively a power of attorney, the safest way to do this is to get back the original and all the copies that you have given to your agent, as well as all the photocopies that may have been made by banks, realtors, merchants, landlords and other people who are relying on the power of attorney you have signed.
Are there any special requirements for Powers of Attorney?
A power of attorney must always be signed in front of a notary public. When a power of attorney is used to transfer land or to do business on behalf of a person who has become incapacitated, it may have to be recorded, depending upon state law. As a general rule, however, a power of attorney does not need to be recorded in order to be effective.
Does every business or bank have to accept my Power of Attorney?
No, every business or bank is free to accept or reject a power of attorney. Some businesses or banks require that the power of attorney be recorded while others do not. Some banks will accept only a special power of attorney. The best rule is to check with the business or bank before obtaining or using a power of attorney to be sure that it will be accepted.
Does a Power of Attorney expire upon my death or mental incapacity?
A power of attorney expires on the death of the grantor (the person signing it) or of the agent named in it (unless a substitute agent is named). Many people choose to have an additional clause in a power of attorney that makes provision for its continued existence in the event of mental incapacity. This type of power of attorney is called a durable power of attorney. You should remember, however, that a valid power of attorney must be signed while the grantor is sane and mentally competent. If the grantor wants to prepare a power of attorney that only becomes valid upon his or her incapacity, that document can also be prepared by this office, and it is called a springing power of attorney because it "springs to life" upon the grantor's incapacity.
What if I move?
Generally, a Power of Attorney that is valid when you sign it will remain valid even if you change your state of residence. Although it should not be necessary to sign a new Power of Attorney merely because you have moved to a new state, it is a good idea to take the opportunity to update your Power of Attorney.
Will my Power of Attorney expire?
Some states used to require renewal of Powers of Attorney for continuing validity. Today, most states permit a "durable" Power of Attorney that remains valid once signed until you die or revoke the document. However, you should periodically meet with your lawyer to revisit a Power of Attorney and consider whether your choice of agent still meets your needs and learn whether developments in state law affect your Power of Attorney.
For more information or to schedule an appointment with one of the Litchney Law Firm’s experienced Estate Planning attorneys please call us at 916-983-2941 or use the contact form on the website to schedule your free initial consultation!
An important part of lifetime planning is the Power of Attorney. Valid in all states, these documents give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). The latter are "springing" Powers of Attorney. It may give temporary or continuous, permanent authority to act on your behalf. A power of attorney may be revoked, but most states require written notice of revocation to the person named to act for you.
The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact." With a valid Power of Attorney, your agent can take any action permitted in the document. Often your agent must present the actual document to invoke the power. For example, if another person is acting on your behalf to sell an automobile, the motor vehicles department generally will require that the Power of Attorney be presented before your agent's authority to sign the title will be honored. Similarly, an agent who signs documents to buy or sell real property on your behalf must present the Power of Attorney to the title company. The same applies to sale of securities or opening and closing bank accounts. However, your agent generally should not need to present the Power of Attorney when signing checks for you.
Why would anyone give such sweeping authority to another person? One answer is convenience. If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney. Another important reason to use Powers of Attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity. Such a disability may be temporary (e.g., due to travel, accident, or illness) or it may be permanent.
If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you. With A Power of Attorney, you choose who will act and define their authority and its limits, if any.
Who Should Be Your Agent?
You may wish to choose a family member to act on your behalf. Many people name their spouses or one or more children. In naming more than one person to act as agent at the same time, be alert to the possibility that all may not be available to act when needed, or they may not agree. The designation of co-agents should indicate whether you wish to have the majority act in the absence of full availability and agreement. You should name a successor agent to address the possibility that the person you name as agent may be unavailable or unable to act when the time comes.
There are no special qualifications necessary for someone to act as an attorney-in-fact except that the person must not be a minor or otherwise incapacitated. The best choice is someone you trust.
How The Agent Should Sign?
Assume Elvis Presley appoints his wife, Priscilla Beaulieu Presley, as his agent in a written power of attorney. Priscilla, as agent, must sign as follows: Elvis Presley, by Priscilla Beaulieu under POA or Priscilla Beaulieu Presley, attorney-in-fact for Elvis Presley.
Beyond Signing Checks
In addition to managing your day-to-day financial affairs, your attorney-in-fact can take steps to implement your estate plan. Although an agent cannot revise your will on your behalf, some jurisdictions permit an attorney-in-fact to create or amend trusts for you during your lifetime, or to transfer your assets to trusts you created. It is prudent to include in the Power of Attorney a clear statement of whether you wish your agent to have these powers.
Gifts are an important tool for many estate plans, and your attorney-in-fact can make gifts on your behalf, subject to guidelines that you set forth in your Power of Attorney. For example, you may wish to permit your attorney-in-fact to make "annual exclusion" gifts (currently up to $10,000 in value per recipient per year) on your behalf to your children and grandchildren. It is important that the lawyer who prepares your Power of Attorney draft the document in a way that does not expose your attorney-in-fact to unintended estate tax consequences. While some states permit attorneys-in-fact to make gifts as a matter of statute, others require explicit authorization in the Power of Attorney.
State Laws Vary
Beyond the ability to make gifts on your behalf, many aspects of a Power of Attorney are governed by state law. Generally, the law of the state in which you reside at the time you sign a Power of Attorney will govern the powers and actions of the agent(s) under that document.
Questions about Powers of Attorney
What is a Power of Attorney?
A power of attorney is a document that allows someone else to act as your legal agent. Thus, a power of attorney can be used to allow a friend to sell your car, to let your spouse talk to the holders of you accounts, or to authorize a relative to take your child to the hospital. It can also be used to sell or buy property.
Are there different kinds of Powers of Attorney?
Yes. There are three types of Powers of Attorney: general, special and durable. A general power of attorney allows the person you name (or your agent) to do any and all things that you could legally do, from registering a car to selling a house. A special (or limited) power of attorney lists a particular act that the agent is authorized to do and limits the agent to that act. The agent can, of course, be authorized to do more than one legal act in a single special power of attorney. A durable (springing) power of attorney allows your agent to manage your own personal and financial affairs, when you become incompetent, incapacitated and/or disabled, and will last as long as you are alive or until you revoke it. We typically create general springing durable powers of attorney.
What are some of the things a Special or General Power of Attorney can do?
You can use a special power of attorney to allow someone to do almost all legal actions that you can do yourself. Thus, for example, you could prepare a special power of attorney that lets your designated agent:
1. Buy or sell real estate;
2. Purchase a car or sell your furniture;
3. Register your car;
4. Sign your paycheck or withdraw money from your bank account;
5. Admit your child to the hospital for needed medical care;
6. Ship or store your car, luggage and household goods;
7. Sign your name to a lease or an agreement to connect utilities, such as electricity, gas, oil or telephone service;
8. Cash or deposit tax refund checks or transfer stocks and bonds.
Are there things a Power of Attorney cannot do?
While a power of attorney will be accepted as valid for most purposes, in California there are some items that cannot be accomplished by using a power of attorney because these actions are so personal in nature that they cannot be delegated to another. Thus, for example, a marriage ceremony or the execution of a Will cannot be done by power of attorney. In addition, there are times when a certain form of power of attorney is required and none other will be accepted – an example is the special form of power of attorney used by the Internal Revenue Service when a person allows a friend or relative to cash an IRS refund check.
All this sounds like a great idea. Why doesn't everyone have a Power of Attorney?
A power of attorney can be very useful if you have one in effect when you need it. But a power of attorney can be abused as well as used; there can be disadvantages to having one as well as advantages. A husband who is divorced from his wife might use the power of attorney she gave him to clean out her individual bank account, which is why ours expire upon divorce. A well-meaning older person might give a power of attorney to a younger relative, only to discover that the relative squandered and spent the assets of the older person. A power of attorney always has the potential for being a very helpful or a very dangerous document for those reasons. Therefore, you must exercise great care in selecting the person to be your agent.
If I decide I want to cancel my Power of Attorney, can I?
If you want to cancel or terminate a power of attorney before it expires, you can prepare and execute a Revocation of Power of Attorney. Give a copy of the revocation to any person that might deal with the person to whom you gave your power of attorney. When attempting to cancel effectively a power of attorney, the safest way to do this is to get back the original and all the copies that you have given to your agent, as well as all the photocopies that may have been made by banks, realtors, merchants, landlords and other people who are relying on the power of attorney you have signed.
Are there any special requirements for Powers of Attorney?
A power of attorney must always be signed in front of a notary public. When a power of attorney is used to transfer land or to do business on behalf of a person who has become incapacitated, it may have to be recorded, depending upon state law. As a general rule, however, a power of attorney does not need to be recorded in order to be effective.
Does every business or bank have to accept my Power of Attorney?
No, every business or bank is free to accept or reject a power of attorney. Some businesses or banks require that the power of attorney be recorded while others do not. Some banks will accept only a special power of attorney. The best rule is to check with the business or bank before obtaining or using a power of attorney to be sure that it will be accepted.
Does a Power of Attorney expire upon my death or mental incapacity?
A power of attorney expires on the death of the grantor (the person signing it) or of the agent named in it (unless a substitute agent is named). Many people choose to have an additional clause in a power of attorney that makes provision for its continued existence in the event of mental incapacity. This type of power of attorney is called a durable power of attorney. You should remember, however, that a valid power of attorney must be signed while the grantor is sane and mentally competent. If the grantor wants to prepare a power of attorney that only becomes valid upon his or her incapacity, that document can also be prepared by this office, and it is called a springing power of attorney because it "springs to life" upon the grantor's incapacity.
What if I move?
Generally, a Power of Attorney that is valid when you sign it will remain valid even if you change your state of residence. Although it should not be necessary to sign a new Power of Attorney merely because you have moved to a new state, it is a good idea to take the opportunity to update your Power of Attorney.
Will my Power of Attorney expire?
Some states used to require renewal of Powers of Attorney for continuing validity. Today, most states permit a "durable" Power of Attorney that remains valid once signed until you die or revoke the document. However, you should periodically meet with your lawyer to revisit a Power of Attorney and consider whether your choice of agent still meets your needs and learn whether developments in state law affect your Power of Attorney.
For more information or to schedule an appointment with one of the Litchney Law Firm’s experienced Estate Planning attorneys please call us at 916-983-2941 or use the contact form on the website to schedule your free initial consultation!