Chapter 10 - § 10.1 • FINANCIAL POWERS OF ATTORNEY

• Jurisdiction: Colorado

§ 10.1 • FINANCIAL POWERS OF ATTORNEY

§ 10.1.1—Basic Definition of a Financial Power of Attorney

A financial power of attorney, also known as a general power of attorney or general power of attorney for property, is a very flexible and inexpensive method for one person (the "principal") to give another person (the "agent" or "attorney-in-fact") legal authority to manage some or all of the principal's financial affairs. The agent has the obligation to make decisions based upon the preferences of the principal and the authority granted in the document. An agent may not override the wishes of the principal. In general, the agent has authority to do whatever the principal may do — withdraw funds from bank accounts, trade stock, pay bills, cash checks, etc. — except as expressly limited in the power of attorney. When transacting business on behalf of the principal, the agent must use the principal's finances as the principal would use them for the principal's own benefit.

§ 10.1.2—The Difference Between a Medical and a Financial Power of Attorney

A medical power of attorney generally gives an agent the authority to make medical and personal decisions on behalf of the principal. A financial power of attorney gives an agent authority to manage the principal's finances and property, and to transact business on behalf of the principal. The following sections describe these two powers of attorney in greater detail. Medical powers of attorney, also known as health-care powers of attorney, are discussed in § 10.2.

§ 10.1.3—Limited Powers of Attorney

A limited power of attorney, also known as a special power of attorney, grants an agent the legal authority, in writing, to perform a specific act or acts on behalf of the principal. Limited/special powers of attorney also are common in real estate, e.g., a principal grants an agent the authority to close on a real estate sale.

§ 10.1.4—Durable Powers of Attorney

A durable power of attorney permits an agent to make decisions on behalf of the principal even if the principal becomes incapacitated. Under former Colorado law, to make a power of attorney durable, the principal had to include language stating that "this power of attorney shall not be affected by disability of the principal" or "this power of attorney shall become effective upon the disability of the principal," or similar words to confirm that the principal intended for the agent's authority to continue regardless of the principal's subsequent disability or illness. C.R.S. § 15-14-501; see also Visser ex rel. Eder v. Mahan, 111 P.3d 575 (Colo. App. 2005). However, as part of the adoption of the Uniform Power of Attorney Act, all powers of attorney signed after January 1, 2010 will be durable unless otherwise stated. C.R.S. § 15-14-704. Nevertheless, it is still advisable for practitioners to include the "durable" language in powers of attorney to help ensure that the power of attorney is honored in other states. See § 10.1.20.

§ 10.1.5—Benefit of a Durable Power of Attorney

If a principal becomes incapacitated because of an accident or illness, the agent may immediately step in and make decisions on behalf of the principal without the necessity of going to court to obtain a guardianship and/or conservatorship. Guardianship and conservatorship proceedings may be expensive, public, and time-consuming, and the outcome of such proceedings may or may not be in accord with the protected person's wishes. By preparing a durable power of attorney in advance, the principal decides who will make his or her decisions and, by doing so, may save his or her family the stress and expense of a court proceeding.

§ 10.1.6—Creation of a Power of Attorney

Any adult with capacity can create a power of attorney by writing down the name of the person he or she wishes to designate as an agent and exactly what he or she wants the agent to do. Once the document has been prepared, the principal should have it notarized.

Because a power of attorney should be tailored to the principal's particular circumstances, it preferably will be written by an attorney to ensure that the principal's intentions are clearly expressed and that the principal understands the breadth of the authority he or she is giving to the agent. However, principals often will find powers of attorney forms available to the public through various sources. Under these circumstances, the "State of Colorado Statutory Form — Power of Attorney" is probably the best form to use. C.R.S. § 15-14-741. The statutory form was revised as part of the passage of the Uniform Power of Attorney Act, and again in 2011 as part of the Probate Omnibus Bill.¹ The updated statutory form is included as Exhibit 10A to this chapter.

§ 10.1.7—Effective Date for Powers of Attorney

The terms of a power of attorney will determine when it takes effect. In general, a power of attorney may take effect in two different ways:

1) A "springing power," which means that the power of attorney will take effect only when an event described in the instrument takes place. Typically, the event would be when a licensed physician determines that the principal is incapacitated.
2) A "standing power," which takes effect as soon as it is signed by the principal and gives the agent immediate authority to act on behalf of the principal.

In the absence of language in the power of attorney document indicating that the power of attorney is effective at a future date or on the occurrence of a future date or contingency, the power of attorney is immediately effective, or a standing power. C.R.S. § 15-14-709. While the two arrangements described above are most common, powers of attorney may contain language that blends these two concepts. For example, a principal may direct that a power of attorney is "standing" if the principal's spouse is acting as agent; however, if the spouse cannot act, the successor agent's power may be "springing."

Practice Pointer
As a practitioner, when drafting a standing power of attorney for a principal, consider also requiring the

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