Power of Attorney FAQ - United States

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A Power of Attorney is a document which gives another party the legal authority to act on your behalf in order to manage your legal and financial affairs. The power given can be very broad to allow complete control over all your finances and property, or it can be limited to a specific task. A Power of Attorney is crucial to have when planning for future incapacity or extended absences from home.

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Contents

General Information

What is a power of attorney?

A power of attorney is a document in which one person (the principal) appoints another person (the attorney-in-fact) to act for him or her. There are many reasons why you might want to appoint someone else to look after your financial affairs. For example, if you are going to be out of the country for a lengthy period of time, you might want someone to do your banking while you are gone. If you are approaching old age, you may want to give a power of attorney to a person you trust so that he or she can manage your property for you.

What are the differences between durable and ordinary powers of attorney?

There are two major types of powers of attorney: ordinary and durable. An ordinary power of attorney is only valid as long as the principal is capable of acting for him or herself. If the principal dies or becomes mentally incompetent, the power of attorney is invalidated. A durable power of attorney remains valid even if the principal later becomes mentally incompetent. (Note: the principal must be competent at the time the power of attorney is made.) In either case, the power of attorney becomes invalid when the principal dies. A power of attorney cannot be used to bequeath property upon the death of the principal.

What are the differences between general and specific powers of attorney?

A general power of attorney is one that gives the attorney-in-fact the authority to do anything the principal could do him or herself. A specific power of attorney is one that gives the attorney-in-fact authority to act for a particular purpose (e.g. to buy or sell a particular piece of property).

Will a power of attorney still be valid after the principal dies?

NO. Generally speaking, when a person dies, the executor (also called a "personal representative") appointed in the person's last will and testament takes control of the deceased person's property and distributes it according to the instructions in the will. If there is no will (or if the will is invalid), each jurisdiction has intestacy legislation that distributes the deceased person's property to his or her relatives according to a set of rules. A court generally appoints an administrator to oversee this process. Unfortunately, the deceased person's wishes are not taken into account during the process (which can be very lengthy), since they have not been formally expressed in the proper manner.


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The Principal

Who is the principal?

The principal is the person who needs someone else to act for him or her. The principal must be an adult. The principal must be capable of making his or her own decisions at the time the power of attorney is executed (signed).

What is "incapacity"?

A person is incapable of managing property if the person is unable to understand information relevant to making a decision about the management of property, or if the person cannot appreciate the foreseeable consequences of making (or not making) a decision about the management of property.


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The Attorney-in-fact

Who is the attorney-in-fact?

The person appointed by the principal is called the attorney-in-fact. The attorney-in-fact is the person who acts for the principal.

Does the attorney-in-fact have to be a lawyer?

No, there is no need for the attorney-in-fact to be a lawyer. (See below for attorney-in-fact qualifications.)

What qualifications does an attorney-in-fact need to have?

The attorney-in-fact must be a capable adult. The attorney-in-fact cannot be an undischarged bankrupt. The attorney-in-fact should not be the owner, operator or employee of a nursing home or extended care facility in which the principal is a resident.

What qualities should I look for in an attorney-in-fact?

Your attorney-in-fact must be someone whom you trust completely. In addition, remember that your attorney-in-fact will have complete authority to deal with your financial and legal affairs (subject to any limitations or restrictions specified in your power of attorney). You should ensure that the person you choose has adequate financial management skills and sufficient time to handle your affairs properly. Your attorney-in-fact must be available when required, be able to objectively make decisions and be able to keep accurate financial records.

What are the responsibilities of my attorney-in-fact?

Your attorney-in-fact has the following responsibilities:

  • to act in your best interest;
  • to keep accurate records of dealings/transactions undertaken on your behalf;
  • to act for you with the utmost good faith and to avoid situations where there is a conflict of interest; and
  • to keep your property and money separate from their own.

Is it okay to appoint a relative as attorney-in-fact?

Yes, people often appoint relatives as attorneys-in-fact.

Can my attorney-in-fact also be a beneficiary in my will?

Yes, attorneys-in-fact can also be beneficiaries in your will.

What are "joint" or "joint & independent" attorneys-in-fact?

Sometimes a principal will want to appoint two attorneys-in-fact. In that case the principal must decide whether the attorneys-in-fact will be "joint" attorneys-in-fact or "joint and independent" attorneys-in-fact. Joint attorneys-in-fact must act together. They must both agree before any action can be taken, and they must both take the same action at the same time. If one is absent, no action can be taken. Joint and independent attorneys-in-fact can act together or individually. Either one can take an action without consulting the other. If one is absent, the other can still act.

What is an alternate/substitute attorney-in-fact? Do I need one?

It is a good idea to appoint an alternate/substitute attorney-in-fact but it is not absolutely necessary. An alternate/substitute attorney-in-fact can only act when the attorney-in-fact is unable or unwilling to continue acting for the principal. Note: A third party (e.g. the principal’s bank) may require proof that the original attorney-in-fact is unable to continue as attorney-in-fact before accepting instructions from the alternate. Where two attorneys-in-fact have been appointed, the document may state that if one dies or is otherwise incapable of acting, the other will continue as sole.

I am an attorney-in-fact. How should I sign documents on the principal's behalf?

There is no one standard way for an attorney-in-fact to sign documents. However, when you do sign, it is important that you clearly state who the principal is and that you are acting as their attorney-in-fact. One convention is to write the principal's name, then sign your name, and then indicate that you are the attorney-in-fact. The following is an example:

John Johnson, by Jane Smith, Attorney-in-fact.

You should always have a copy of the power of attorney with you whenever you are acting as an attorney-in-fact. You may be required to sign an affidavit stating that the power of attorney is valid, that it hasn't been revoked, and that the principal is still alive. And remember: failure to comply with directions given by the principal, without reasonable cause, can leave you subject to civil liability for any damages caused by noncompliance.


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Place and Time

What is "jurisdiction"?

A jurisdiction is a place that has its own laws. It is a territory with boundaries, such as a state or a province. For example, California is a jurisdiction in the United States, Ontario is a jurisdiction in Canada, Scotland is a jurisdiction in the United Kingdom and Queensland is a jurisdiction in Australia.

What is the "Governing Law"?

A power of attorney is governed by the law of the jurisdiction where the actions of the attorney-in-fact will be performed. Normally, this is the place in which the property of the principal is located. Therefore, it is not a good idea to appoint an attorney-in-fact who resides in a different jurisdiction, unless the property or assets you want the attorney-in-fact to deal with are also in the different jurisdiction. If you anticipate that your attorney-in-fact will be acting in more than one jurisdiction, you should probably make separate powers of attorney for each jurisdiction.

Examples:

  • If your bank accounts and other property are located in the jurisdiction where you live, you will want to appoint an attorney-in-fact who lives in the same jurisdiction.
  • If you live in one jurisdiction but have a bank account or other property someplace else, and you want an attorney-in-fact to deal with that property, you will want to choose the place where the property is located as the governing law, and appoint an attorney-in-fact who is located in (or is willing to travel to) the same jurisdiction as the property.

When does a power of attorney start?

A power of attorney can start on a date specified in the document, or upon the occurrence of an event (such as disability or incompetence). If there is no specified date or event, a power of attorney starts immediately upon execution.

NOTE: Some jurisdictions do not allow powers of attorney that start on the occurrence of an event.

How/when does a power of attorney end?

An ordinary power of attorney ends automatically when the principal becomes mentally incapacitated or dies. A durable power of attorney ends automatically when the principal dies. As long as you are mentally competent, you may revoke your power of attorney at any time by notifying your attorney-in-fact (in writing) that the power is revoked and destroying the original power of attorney. Otherwise, a power of attorney continues in effect indefinitely, unless the document specifies an end date.

Can I revoke my power of attorney after I have become incompetent?

A person who is incompetent cannot revoke a durable power of attorney. However, an ordinary power of attorney is automatically revoked when the principal is found to be incompetent.

How do I revoke my power of attorney?

You can revoke, or cancel, a power of attorney by giving your attorney a written notice saying that his or her power has ended. Also, you may make a new power of attorney that states your previous power of attorney is now revoked (but you must still notify the previous attorney of the revocation). Third parties (e.g. people or organizations that have been dealing with the attorney) must also be notified. Additionally, if your power of attorney is registered, you must also register the revocation.

Please note that if you fail to inform your attorney of the revocation, your attorney can legally continue to make decisions on your behalf.


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Powers

Should I put restrictions on my attorney-in-fact?

When you give a "general" power of attorney, you give your attorney-in-fact the authority to do anything you could do yourself, with a few exceptions - such as areas where you possess skills that your attorney-in-fact doesn't (e.g. if you are a dentist, you cannot authorize your attorney-in-fact to practice dentistry on your behalf). But there may be some things you would prefer your attorney-in-fact did not do. For example, you may want to require that your attorney-in-fact get prior approval from you before signing checks for large amounts on your account.

Should my attorney-in-fact be allowed to personally benefit from managing my assets?

If the person you are appointing as your attorney-in-fact is also a member of your family or a beneficiary in your will, you may want that person to be able to personally benefit from managing your assets, since you intend that person to become owner of the assets eventually. Generally, however, it is probably not a good idea to allow your attorney-in-fact to personally benefit from managing your assets as this creates a conflict of interest for your attorney-in-fact, who is legally obligated to act in your best interest, not his or her own best interest.

What can the attorney-in-fact do?

The attorney-in-fact may transact business respecting the principal's property in all areas specified by the principal.

Is the attorney-in-fact obligated to do anything?

Generally speaking, the attorney-in-fact is not obligated to act for the principal. However, in some circumstances the attorney-in-fact may agree, in writing, to accept an obligation to take action when necessary. When the attorney-in-fact acts on behalf of the principal, the attorney-in-fact must act in the best interest of the principal.

Does my attorney-in-fact have the authority to act while I am still available and able to take care of my own finances?

Generally speaking, a power of attorney is effective as soon as it is executed (signed and witnessed, etc.) whether or not the principal is available or able to handle his or her own affairs. However, the document might specify that it will only be effective under certain conditions. For example, some powers of attorney specify that they will not come into effect unless and until the principal has become mentally incompetent to handle his or her own finances. Note: Some jurisdictions do not allow powers of attorney that commence upon the occurrence of a condition or event such as mental incapacity.


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Signing Details

What are the requirements for signing, witnesses and notarization?

Different jurisdictions have different signing requirements for powers of attorney, which may depend on what powers are given to the attorney-in-fact. If you are giving your attorney-in-fact the power to sell or otherwise dispose of your property, you will probably have to acknowledge your document before a notary public. Otherwise, witnesses should be legally sufficient. Be aware, however, that many banks and other institutions have their own policies about signing requirements, and may refuse to accept documents that are not notarized regardless of their legal sufficiency. If you want to avoid bureaucratic hold-ups, it is probably a good idea to take your document to a notary public as well as having it witnessed.

What does it mean to "execute" a document?

When a person "executes" a document, he or she signs it with the proper "formalities". For example: If there is a legal requirement that the signature on the document be witnessed, the person executes the document by signing it in the presence of the required number of witnesses.

How should I sign my power of attorney document?

To be valid, you must sign the document with your usual check signing signature. You should also initial each page of the document. The signing and the initialing of the pages must occur in the presence of your notary or witness(es).

After you have signed and initialed your document in front of your notary or witness(es), your notary or witness(es) must sign on the applicable page of the power of attorney and should initial each page. This must occur in your presence.

Does it matter where my power of attorney document is signed and witnessed?

If your document will be used in a different jurisdiction - but not in a foreign nation - there is no problem with having the document signed and witnessed where you live, rather than where the document will be used. The witnessing requirements (number of witnesses required, whether or not notarization is needed) should still be those of the place where the power of attorney will be used, however.

What if my power of attorney will be used in a foreign nation?

If your document is intended to be used in a foreign nation, you may have to have it "authenticated" or "legalized". This is a process whereby a government official (e.g., the Secretary of State, the Foreign Office, the Office of the Attorney General - depending on where you live) certifies that the signature of the authority (e.g. notary or solicitor) on your document is authentic and should be accepted in the foreign nation. For more information about document authentication and legalization, contact the local consulate/embassy of the foreign country your document will be going to, or one of the following government web sites:

United States: http://www.state.gov/m/a/auth/

United Kingdom: http://www.fco.gov.uk/en/about-the-fco/what-we-do/docs-and-legal-services/legalisation/

Canada: http://www.gov.on.ca/MBS/english/mbs/ods/authent.html (web site is for Ontario - other provinces contact the provincial Office of the Attorney General)

Australia: http://www.dfat.gov.au/brisbane/index.html


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Other Considerations

Do I have to pay my attorney-in-fact?

Depending on the kind of relationship you have with the person who will be acting as your attorney-in-fact, you will have to consider whether they should be paid for their services. You can stipulate in your document that your attorney-in-fact will not receive any payment except the reimbursement of out-of-pocket expenses, or you can agree to pay your attorney-in-fact a specified amount. If you prefer, you can authorize your attorney-in-fact to pay him or herself a reasonable amount for acting for you.

Should I have my attorney prepare financial statements?

You can require your attorney-in-fact to prepare periodical financial statements and send them to your accountant, lawyer or some other person you choose. This is a good deal of work, however, and most people do not require it of unpaid attorneys.

Note: Attorneys-in-fact should keep records of their actions.

What are co-owned assets?

If your attorney-in-fact is a family member, you may be joint owners of property. It is important to state this in your document, so that third parties dealing with your attorney-in-fact understand that the attorney-in-fact is entitled to co-own assets with you. Otherwise, the co-owning of assets could give the impression of impropriety.

Do I have to file or record my power of attorney with the County Clerk or the Land Titles Office?

Generally speaking, a power of attorney has to be recorded (filed) with the County Clerk or the Land Titles Office (depending on the jurisdiction) if it could affect real property (land or other real estate). For example, if the attorney-in-fact is authorized to mortgage or sell the principal's real estate, or to purchase real estate on behalf of the principal, the power of attorney will probably have to be recorded at the appropriate office. Note: If this is the case, the document will probably need to be notarized.

Should I nominate my attorney-in-fact as guardian or conservator?

If a court decides that you need a conservator of the person (guardian), one will be appointed for you. The conservator is responsible for your physical care, which under some circumstances includes making health care decisions for you. You may nominate someone to be your conservator if the need arises. The court will probably appoint the person you nominate unless the judge decides that would be contrary to your best interests.


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