Power of Attorney: What is it? Should I have one?

Power of Attorney

One of the most helpful, yet dangerous, legal documents that an older person can sign is a Power of Attorney. This brochure helps answer some of the questions you should ask before you sign a Power of Attorney.

1. What is a Power of Attorney?

It’s a legal document that gives someone else the right to do things for you, in your name, as if you were doing them yourself. The person who gives the power is called the “principal.” The person who gets the power is called the “attorney in fact” or “agent.”

2. What can an agent do in my name?

An agent can do whatever the Power of Attorney allows. It can be quite limited or very broad. If you are interested in having your agent only handle certain financial matters for you, your Power of Attorney can limit what the agent may do. Some powers of attorney let the agent do just about anything. This is usual with pre-printed forms.

3. What are the risks in signing a Power of Attorney?

If a Power of Attorney gives an agent unlimited rights, the agent will have complete access to all the principal’s assets including bank accounts, safe deposit boxes and real estate. If the agent is honest, there will be no problem. If the agent uses the assets unwisely, or for his or her own benefit, the principal may lose them. If that happens, it is unlikely that the agent can be made to repay the lost assets. In other words, the agent can take all of your money and sell your house out from under you. The more you own, the more you can lose.

If you have any doubts about the person you plan to name as your agent, you could seek conservatorship in Probate Court. The court oversees the handling of your property by a conservator with limited powers who in unlikely to steal your assets.

4. What can I do so my agent won’t cheat me?

The most important thing is to choose an agent that you can really trust. If you think there’s any possibility that the agent wants to control your assets for his or her own purposes, don’t make him or her your agent.

Consider other ways of doing what you think you need an agent to do. For example, make arrangements for direct-depositing checks into your account. You may want someone else to have access to your checking account to pay bills. (If you put someone else’s name on your account, you make them a co-owner.) Sign a power of attorney designating an agent for your checking account only. Ask your bank to move enough money every month from your savings account to your checking account to cover your usual debts.

5. What about real estate?

If you think you may own real estate at a time when you may not be able to manage it, then a Power of Attorney can allow someone else to manage the property for you. In fact, without a Power of Attorney, it will be impossible for someone to sell or manage your property without a court order.

6. I know a trust-worthy person and want to make a Power of Attorney. Now what should I do?

Ask the person whether he or she is willing to take on the responsibility you wish to give. If not, plan to name someone else you trust.

Think carefully about what powers you want your agent to have. Make sure that the document you sign will give the agent only those powers, and nothing more, and that it also has the other features you want.

A pre-printed form or one provided by a person who wants to be your agent can get you into trouble. If there is anything in the document that you don’t understand, DON’T SIGN IT. Review it with someone you trust who does understand it and can explain all of its provisions to you. Even better, take it to a lawyer who will look out for your best interests.

7. What else should be in the Power of Attorney?

The law gives a principal some very important choices. Normally a Power of Attorney becomes void when you become disabled, incapacitated, or if a court finds you incompetent. If you want your agent to handle things for you if you become disabled, then you will want to sign a Durable Power of Attorney which remains valid if you become disabled. You should also be aware that all Powers of Attorney automatically end when the principal dies.

Ordinarily, a Power of Attorney becomes effective immediately. You may want it to become effective if and when you become disabled or as of some specific date. You can state this in the Power of Attorney. It “springs” into effect at the time you designate. For most people who are still able to handle their own affairs, a ‘springing’ Durable Power of Attorney is the best choice.

8. Signing the Power of Attorney

Although a Power of Attorney may be “legal” when only the principal signs it, most banks and other institutions will not honor it unless it is witnessed and/or notarized.

9. What if I change my mind after I sign?

You may revoke a Power of Attorney at any time, as long as it doesn’t prohibit revocation. But you will still be bound by anything your agent has done before you revoked. File any revocation with the County Recorder. Give copies to the agent and financial or other institutions with which the agent has been doing business on your behalf.

10. What if I need to become someone else’s agent?

A Power of Attorney is not valid unless the principal is mentally competent when it is signed. The principal must understand what he or she is signing and the effect of it. If someone who is not legally competent appoints you as agent, you may face personal liability if anyone later challenges your actions. If possible, discuss the matter before your loved one loses the ability to understand. If that’s impossible, and there’s no other way to do what needs to be done, you may have to apply to become guardian.

This article is meant to give you general information and not to give you specific legal advice.Prepared by Community Legal Aid Services, Inc. Updated May 2012. CE-95-F257-OSBA