This article explains different types of power of attorney, and how to use them and how to limit the powers of agents/attorneys.
What Is Power of Attorney?
A power of attorney is a legal document in which one person (the principal) appoints another person or organisation to act as an agent on his or her behalf, thus conferring authority on the agent to perform certain acts or functions on behalf of the principal.
The person or organization you appoint is referred to as an ""Attorney-in-Fact"" or ""Agent.""
Types of Powers of Attorney
General Power of Attorney
This is where you appoint someone, usually for a specific period of time, to make financial or legal decisions for you. If you appoint a General Power of Attorney and then lose legal capacity at a later stage the appointment will no longer be valid and the person you have appointed will no longer be able to make decisions on your behalf.
Health Care Power of Attorney
A Health Care Power of Attorney is a document that allows you to designate a person (an ""Agent"") who will have the authority to make health care decisions on your behalf if you are unconscious, mentally incompetent, or otherwise unable to make such decisions
A Health Care Power of Attorney is different from a Living Will because it allows you to appoint someone to make health care decisions for you. A Living Will only allows you to express your wishes concerning life-sustaining procedures.
Special Power of Attorney
A special power of attorney allows you to give only specific powers to the person or organization you appoint as your Agent. For example, you could authorize someone to sell a car or a house for you.
Durable Power of Attorney
A durable power of attorney is actually a general, special or health care power of attorney that contains special durability provisions. If you become mentally incompetent while you have a power of attorney document that's already in effect, a durability provision will allow the document to stay in effect.
You can also sign a durable power of attorney document to prepare for the possibility that you may become mentally incompetent due to illness or an accident. In this case, you would specify that the power of attorney wouldn't go into effect unless a doctor certifies that you are mentally incapacitated.
What is Enduring Power of Attorney?
An enduring power of attorney allows you to delegate the management of your affairs even if you’re no longer able to understand the implications such as if you become mentally incapacitated. However, an enduring power of attorney can only be given while you’re able to understand the nature and effect of the document. There are special rules about the creation of enduring powers of attorney and the responsibilities of the attorney.
Enduring Power of Attorney (Financial)
This is where you appoint someone to make financial or legal decisions for you in the event of you losing, at some time in the future, the capacity to make those decisions for yourself
Enduring Power of Attorney (Medical Treatment)
This is where you appoint someone to make medical treatment decisions for you in the event of you losing, at some time on the future, the capacity to make those decisions yourself
Enduring Power of Guardianship
This is where you appoint someone to make lifestyle decisions for you, such as where you will live, in the event of your losing, at some time in the future, the capacity to make those decisions yourself.
Why Make A Power Of Attorney?
A power of attorney enables a donor's affairs to be managed by a person of their choice when they are unable to conduct them personally, such as if they are ill, travelling overseas or become mentally incapacitated.
Powers of Agent/Attorney
These powers usually include:
• Handling banking transactions
• Entering safety deposit boxes
• Handling transactions involving U.S. securities
• Buying and selling property
• Purchasing life insurance
• Settling claims
• Entering into contracts
• Exercising stock rights
• Buying, managing or selling real estate
• Filing tax returns
• Handling matters related to government benefits
You also have the option to grant the following additional powers to your Agent:
• Maintaining and operating business interests
• Employing professional assistance
• Making gifts
• Making transfers to revocable (""living"") trusts
• Disclaiming interests (this has to do with estate planning strategies to avoid estate taxes)
Can I Limit my Attorney’s Powers?
You can limit or place conditions on how you want your attorney/s to carry out their responsibilities. For example, you could limit their authority so that they only deal with shares, or they can pay bills, but not deal with your property.
If you do not specify any limits, your attorney will be able to make any financial or legal decisions on your behalf until the appointment is changed or cancelled, or you lose capacity.
Mental Competence
In order for a power of attorney document to be valid, you must be mentally competent when you sign it. This means that you must understand the powers that you are granting to your Agent and the implications of having someone else make decisions for you. If there is any question about your mental competence, it's a good idea to have a physician evaluate you and state in writing that you are competent.
If you have signed a durable power of attorney document, it will either remain in effect or go into effect if you become mentally incompetent.
Deciding Who to Appoint
You need to make this decision for yourself. You can choose any adult to be your agent. You should try to appoint someone who you have grounds for believing is trustworthy and who both knows you well enough, and is objective enough, to make the decisions that are best for you. You should talk to that person first to make sure that he or she is willing to be your agent.
Other people, including family members, can now be involved in ensuring that your best interests are taken into account, even if they are not named as an attorney With a General Power of Attorney and an Enduring Power of Attorney (Financial) you can appoint joint decision makers and stipulate, if you wish, that both of them have to agree for their decisions to be valid.
Appointing more than one decision-maker can help you get a balanced outcome.
However, on the other hand, if you appoint them jointly and they cannot come to an agreement about what to do then a decision cannot be made.
Does My Agent Have a Duty to Act on My Behalf?
Yes. Your agent should only do things that you want and that benefit you. Agents have a fiduciary duty to protect your interests. Agents can be held liable if they don't act in your interests, or if they don't do want you ask them to do.
Signing and Witness
A power of attorney must be signed by the person granting the authority (known as the ""Principal""). It must be sign in the presence of witnesses.
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