POA – What is it?

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In this post, I will inform you of the definitions for the most basic terms used. I will also provide you with a general overview of what a POA is and how it is used.

DEFINITIONS:
 Power of Attorney -
• A power of attorney is a written instrument executed by one person, called the principal/grantor, which designates another person, called the agent/attorney-in-fact, to perform acts on the principal’s/grantor’s behalf.

 Principal/Grantor -
• The person who creates the Power of Attorney and thereby authorizes the agent to act on his/her behalf.

 Agent/Attorney in Fact -
• The person named in a Power of Attorney that must act on behalf of the Principal.

 General POA -
• A general POA gives the Agent the full power to act on behalf of the Principal and is effective upon signature, or at a designated time and will remain effective until the Principal becomes incapacitated, disabled or incompetent.

 Limited POA -
• A limited POA may only encompass certain types of transactions and/or may be limited in duration. It may involve the selling of real estate, the closing of a bank account, or it may be valid for the time that you on vacation outside of the country, etc. Limited POAs are drafted to fit individual needs on a one-time basis or for a limited period of time and are usually your best choice.

 Durable POA -
• A durable POA is effective upon signature, or at a designated time and will continue to be effective if the Principal becomes incapacitated, disabled or incompetent.

WHAT IS IT?
A Power of Attorney (POA) is the creation of a fiduciary relationship between an Agent and a Principal, where the Agent must be completely honest and loyal to the wishes of the Principal in their dealings.

In short, a POA is just a document that authorizes one person to handle the affairs of another. The document can cover many topics, from what happens to you in the event that you are incapacitated to make decisions about your healthcare, and what is to be done with your estate after death, to the investment of your money or the purchasing of real estate. It can be customized like any other contract.

If someone has appointed you or asked you to be their agent/attorney in fact, we advise you to consult with a licensed Attorney if you are unsure about your responsibilities/liabilities as an agent/attorney in fact.

HOW IT WORKS?
The Power of Attorney is effective as soon as the Principal signs it, unless the Principal states that it is only to be effective upon the happening of some future event.

A POA is one of the strongest legal documents that an individual can give to another person. A POA can be used to create new debts, buy or sell property, and deplete your bank account. It is important to remember that YOU will be held responsible for the acts of your agent. Thus, you must exercise great care in choosing your agent.

A POA will be accepted as valid for most purposes. However, there are some actions that cannot be accomplished by using a POA because these actions are so personal in nature they cannot be delegated to another. In addition, some businesses require a power of attorney to be in a certain form or be recorded. For example, your bank may accept only a special power of attorney with the account number specifically listed. Whenever possible, you should check with the business before obtaining or using a power of attorney to be sure it will be accepted.

After being certain that the POA gives you the authority to do what you want to do, take the Power of Attorney (or a copy) to the third party. Explain to the third party that you are acting under the authority of the POA and are authorized to do this particular act. Some third parties may ask you to sign a form stating that you are acting properly. If it states something that you do not understand in your capacity as Agent for the Principal, you may wish to consult your attorney prior to signing it. The third party should accept the POA and allow you to act for the Principal. When acting as an Attorney-in-Fact, always make that clear when signing any document.

EXAMPLE - Tiffany Reid, by Nottingham Smith as her Attorney-in-Fact. In this example, Tiffany Reid is the Principal, and Nottingham Smith is her Agent/Attorney-in-Fact signing in his representative capacity.

We hope that the information presented in this post is helpful for our readers. If you have any questions or concerns, please address them in the comment box provided below.

Our helpful and capable staff invites you to contact us today to schedule an informative, 30 minute free, initial consultation with an estate planning attorney.

PLEASE LOOK FORWARD TO OUR NEXT BLOG POSTING SCHEDULED FOR TUESDAY, APRIL 20, 2010