Power of Attorney
| Author | Jeffrey Wilson |
| Pages | 713-718 |
Page 713
A power of attorney is a legal instrument that individuals create and sign; it gives someone else the authority to make certain decisions and act for the signer. The person who has these powers is called an "agent" or "attorney-in-fact." The signer is the "principal." Merely because the word "attorney" is used does not mean that the agent must be a lawyer.
Even if principals have delegated authority to an agent through a power of attorney, they can still make important decisions for themselves. But, their agents may act for them as well. Their agents must follow directions as long as they are capable of making decisions for themselves. A power of attorney is simply one way to share authority with someone else.
As a principal, if the principal's decisions conflict with those of the agent, the principal's decision will govern, assuming that the agent confers with the principal prior to taking an action. Be aware that if the agent has acted on the principal's behalf and acted within the scope of authority granted by the power of attorney, then the principal may be obligated by the terms and conditions of his actions. If the agent does not respect the principal's wishes, the principal should revoke the power of attorney.
Principals can revoke their agent's authority at any time if they become dissatisfied with the agent's performance. If they do not revoke a power of attorney themselves, it will automatically expires upon their death. The power of attorney is not a substitute for a will. Upon the principal's death, either the will or the state's law of intestacy will govern the distribution of the estate.
The person designated to be the agent assumes certain responsibilities. First and foremost, the agent is obligated to act in the principal's best interest. The agent must always follow the principal's directions. Agents are "fiduciaries," which means that the agent must act with the highest degree of good faith in behalf of their principals.
Although an agent is supposed to make decisions in the principal's best interest and to use the principal's money and other assets only for the principal's benefit, the agent nevertheless has great freedom to act as he or she pleases. Thus, it is crucial that trustworthy individuals are chosen to execute a power of attorney. Before selecting an agent, principals should ask themselves the following questions:
Do I trust the candidate for agent?
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Will the agent understand my feelings and my point of view?
Will the agent follow my wishes if I am ever incapacitated?
Will the agent do the necessary work and spend the time to properly handle my affairs?
Will the agent be able to visit me or to keep in contact by phone?
Is this person informed about finances?
Will the agent need to seek the help of experts?
An agent's relationship with the principal is governed by several basic rules. The agent must:
keep his money separate from the principal's,
keep detailed records concerning all transactions he engages in on the principal's behalf,
not stand to profit by any transaction where the agent represents the principal's interests,
not make a gift or otherwise transfer any of the principal's money, personal property, or real estate to himself unless the power of attorney explicitly states he can do so.
Principals usually grant their agents fairly broad powers to manage their finances and to conduct financial transactions in their behalf. Even so, principals can grant their agents as much or as little authority as they think reasonable. Typical powers include the authority to do the following:
act for the principal with respect to inheritances or claim property to which the principal is otherwise entitled,
collect the principal's Social Security, Medicare or other governmental benefits,
conduct real estate transactions (purchase, sell, mortgage, etc.),
conduct transactions with banks and other financial institutions,
file and pay the principal's state, federal, and local taxes,
hire a lawyer to represent the principal in court,
make investment decisions for the principal (purchase and sell stocks, bonds, mutual funds, etc.),
manage the principal's retirement funds,
purchase or sell insurance policies and annuities for the principal
run the principal's business, and
use the principal's money to pay the principal's living expenses.
Whatever powers the principal gives the agent, the agent must act for the principal's best interests, must maintain accurate records, keep the principal's property separate from his or hers and avoid conflicts of interest.
Agents are sometimes paid for their work on the principal's behalf. This depends on the nature of the relationship between the agent and the principal, as well as the nature of the agent's duties. In most situations where the agent's duties are fairly simple, there is no payment for the performance of those duties. If, however, the agent is saddleburdened with substantial responsibilities (such as running a business or managing a complex transaction), payment for the agent's services may be appropriate. If the principal wishes to or expects to pay the agent, the principal should clearly say so and outline the details of payment in the power of attorney. Because...
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