What is a Power of Attorney

Although many have heard the term, it is important to understand what a power of attorney is. A power of attorney is important and comes in many different forms as part of estate planning. Understanding the limitations of each and how power of attorney best fits your needs now and in the future is vital.

Defined: The California Probate Code Section sets forth the different types and limitations of a power of attorney. At its core, a Power of Attorney allows you to appoint an “attorney-in-fact” or agent, to act in your place for financial or other purposes if and when you are ever incapacitated or cannot act on your own behalf. For purposes of this article, an attorney-in-fact is a person granted authority to act for the principal, or the person who executes a power of attorney.

California recognizes four different types of powers of attorney which include: (a) General Power of Attorney; (b) Limited Power of Attorney; (c) Durable Power of Attorney; and (d) Springing or Medical Power of Attorney.

  • General. A comprehensive authority that grants the attorney-in-fact all the powers and rights that you have. In other words, the attorney-in-fact could handle all of your financial decisions, including but not limited to paying bills, opening/closing accounts, or enter contracts. A general power of attorney, unless rescinded, remains in effect until the death of the principal.
  • Limited. Although similar to a general power of attorney in all respects, a limited power of attorney dictates the specific authority the attorney-in-fact has to act in your place. Basically, the principal grants the attorney-in-fact the ability to act in their place for the express purpose of some given act, such as a portfolio manager who handles a retirement and bank account.
  • Durable. A principal designates another person as attorney-in-fact in writing wherein the power of attorney can become effective after the incapacity of the principal, or prior thereto. In either instance, the power of attorney is not later affected by some future incapacity of the principal. In short, without a durable power of attorney provision, should the principal become incapacitated, there will be no representation by an attorney-in-fact. Otherwise, a durable power of attorney will remain in effect until your death unless rescinded prior thereto.
  • Springing. A power of attorney that by its terms, becomes effective at a specified future time or on the occurrence of a specified future event or contingency, including, but not limited to, the subsequent incapacity of the principal. Similar to a durable power of attorney, a springing power of attorney can allow your attorney-in-fact to act for you if you become incapacitated, but it does not become effective until you are incapacitated.

Regardless of what type of power of attorney you use, it is important to think carefully about who will be your attorney-in-fact. Your attorney-in-fact will have a lot of control over your finances so it is crucial that you trust him or her completely.

Legal Requirements:

As per the relevant California Probate Code Sections, a natural person having the capacity to contract may execute a power of attorney and a power of attorney is legally sufficient if all of the following requirements are satisfied: (a) The power of attorney contains the date of its execution; (b) The power of attorney is signed either (1) by the principal or (2) in the principal’s name by another adult in the principal’s presence and at the principal’s direction; (c) The power of attorney is either (1) acknowledged before a notary public or (2) signed by at least two witnesses who satisfy the requirements of Probate Code Section 4122.

A power of attorney dealing with financial matters must be signed by the principal either before a notary public or before two witnesses. If you are authorizing your agent to handle real estate matters, it should be notarized and recorded.

A health care power of attorney must be signed by the principal before two witnesses, and the two witnesses must also sign the document. The witnesses may not be your agent, your health care provider, or an employee of your health care provider.

Limitations:

Under the authority granted to the attorney-in-fact, there may be the potential risk for self-dealing or conflicts of interest. Since an attorney-in-fact has the authority granted under the power of attorney, it is important to name a person who is both trustworthy and capable to serve in your best interest. The attorney-in-fact will have access to your financial information with the potential ability to transfer property, interest, and funds.

Regardless of whether the principal has become incapacitated or is otherwise unable to act, the attorney-in-fact has a duty to complete a transaction that he/she has commenced. Where an attorney-in-fact has expressly agreed in writing to act for the principal, the attorney-in-fact has a duty to act pursuant to the terms of the agreement.

Important facts to consider regarding a power of attorney:

  • You cannot execute a power of attorney if you are incapacitated, nor can someone do so on your behalf;
  • An attorney-in-fact cannot simply do as they please with your estate, but must rather act as your fiduciary in that they “shall observe the standard of care that would be observed by a prudent person dealing with property of another”;
  • Although your attorney-in-fact can establish a trust, they cannot make or change your Will;
  • A power of attorney does not survive your death.

Conclusion:

Regardless of what type of power of attorney you use, it is important to think carefully about who will be your attorney-in-fact. Your attorney-in-fact will have a lot of control over your affairs and finances, and it is crucial that you trust him or her completely.

At any time prior to you become incapacitated, or upon your death, a power of attorney may be revoked by you in writing.

Important:

The powers granted under a “Durable Power of Attorney” will continue to exist even if you can no longer make your own decisions in regard to the management of your property. You can amend or change this durable power of attorney prior to incapacity by either executing a new durable power of attorney or by executing an amendment through the same formalities as an original. You have the right to revoke or terminate this durable power of attorney at any time, so long as you are competent.

Please see our other related articles

Wills and Trust
Real Property Fraud
Holding Title to Property
Principals and Agents
Why Use Bushore Real Estate

Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.

Spread the word. Share this post!

Leave A Reply

Your email address will not be published.