Powers of Attorney 101
There is a common myth seen in TV and movies that once you appoint someone your power of attorney, they can then immediately run off with all of your money at any time and leave you with nothing. Like a lot of legal concepts portrayed in media, this is not true. First, however, let’s define what a power of attorney actually is.
A Power of Attorney is an instrument granting someone authority to act as agent or attorney-in-fact for the grantor, according to Black’s Law Dictionary (9th).
However, Dale Bethel has provided a more useful definition;
A Power of Attorney is important as they allow you to appoint an agent to act on one’s behalf to manage their assets if that person becomes disabled or incompetent. The result: You keep your disability and/or incapacity private. Everyone should have a Financial and a Healthcare Power of Attorney.
While a power of attorney does instill power in another to make decisions on your behalf, this power is not unrestrained. First off, for the vast majority of people, the authority granted is usually revocable and automatically terminates when the grantor passes away and, in some cases, when the grantor is incapacitated. Secondly, the person who is granted this authority is in a fiduciary relationship with the grantor and therefore, all of their decisions have to be made at the discretion of the grantor or be made in accordance with the grantor’s best interests based upon the specific powers granted.
The most common types of powers of attorney seen are:
A Healthcare Power of Attorney (Advanced Directive, Advanced Healthcare Directive) is a document that takes effect upon one’s incompetency and designates a surrogate decision-maker for healthcare matters.
A Durable Power of Attorney is a power of attorney that is used to manage all of the affairs of the grantor and it remains in effect during the grantor’s incompetency. These documents can be used in a similar fashion to a healthcare power of attorney allowing one to make medical decisions on the grantor’s behalf and are usually triggered to go into effect when the grantor becomes incompetent. Durable powers of attorney do not have a set time limit but they to terminate upon the death of the grantor.
A Non-Durable Power of Attorney is a document with a set time limit and is usually limited to a particular transaction. These are less encompassing as a durable power of attorney and are terminated when the grantor either dies or becomes incapacitated or when the particular transaction is complete.
There are many types of different Powers of Attorney which we’ll cover in greater depth in a future post.
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