what is a power of attorney?

A power of attorney is a very powerful document. It allows someone to stand in the shoes of the person that granted a power of attorney. For example, when I was in law school I gave one of my friends with power of attorney to rent an apartment for me because I was out of the country in a school program. If I didn't have an apartment rented before I returned to Dallas at the end of the summer program, then I might not have found the best place for me to live for that school year. My friend found a great apartment she rented it with my power of attorney and it was just as if I was in Dallas making those arrangements.  She was able to legally bind me to a rental agreement because I'd given her that authority to stand in my shoes. 

Common Uses of a Power of Attorney

Often a power of attorney is used to help handle negotiations when the grantor of the power of attorney is not available to negotiate. For example, my foreign exchange brother is out of the country and he needs to sell his car so he granted me power of attorney to be able to sell his car. This allows me to act in his shoes as if he was here in the USA to sell his car. I am able to bind him to a legal contract to sell his car. Other people have used powers of attorney to sell their homes when they are out-of-state or out of the country.

The power of attorney must list all of the powers granted to the person acting as the attorney-in-fact, on behalf of of the principal, the person who created the power of attorney. For example, many of that software programs that draft powers of attorney do not include the necessary power to sell a house, take care of a pet, or to get mail.  Title companies are very picky about reviewing the power of attorney to ensure that the attorney-in-fact has the necessary power to bind the principal to the contract.  More than once, we have had clients request that we prepare a new power of attorney because the out-of-the-box software did not provide a document that would be honored by the title company.

Another use of power of attorney is by people who are elderly or ill for their family member or friend to them in handling their day-to-day affairs such as paying bills. This allows the principal to continue to solely own their property such as a bank account with the advantage that the attorney-in-fact can handle the day-to-day affairs without giving up any ownership.

Limits of Power of Attorney

Powers of Attorney attorneys are only good for as long as the principal is alive. The power of attorney can include a clause that says that it is good until attorney-in-fact knows that the principal is deceased.  This allows any people or companies relying upon the attorney-in-fact commitment of the principal a margin of safety. Many people are shocked that their power of attorney ends with the principal passes away. Often we receive calls requesting powers of attorney to be drafted for people who are already deceased. I believe this is because people don't understand what power of attorney are. What they understand is a power of attorney would allow them, as an attorney-in-fact, to stand in the shoes of the principal.

Additionally, powers of attorney can be revoked at any time that the principal is competent. The attorney-in-fact must act as a fiduciary to the principal at all times. This means that whatever action the attorney-in-fact does on behalf of the principal it must be as the principal wants. 

Another limited power of attorneys that we often use is that the power of attorney is a springing power. This means the principal does not grant the powers enumerated in the document until and unless to doctors agree that they are unable to handle their affairs.  Sometimes these powers of attorney are not used because the principal passes away before to doctors agree that they are incompetent. In that case, the power of attorney would never be valid. The attorney-in-fact would have never been given full powers under the document.

In our comprehensive estate plans we provide two powers of attorney. One power of attorney is limited to healthcare decisions. This is because you don't always want the same person handling your financial business that is handling your healthcare business. The second power of attorney is to handle all other matters for example preparing tax returns.

If you want to see us about preparing a power of attorney for you please schedule an appointment with us.  It is part of a life plan.  We are now calling the Family Wealth Planning Sessions Life and Legacy Planning Sessions because a comprehensive estate plan includes a plan for living when the principle is incompetent and for after the principal passes away. Do you have a plan? Has it been reviewed in the last year? If not, mention this blog to receive a free two hour Life and Legacy Planning Session! 



Susan Bratcher
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Owner and Attorney