Signing a power of attorney document gives someone (an agent or attorney-in-fact) legal authority to act on behalf of another (the principal). But what rights does an attorney-in-fact have?
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Types of Power of Attorney
A power of attorney (POA) directs when the agent’s authority begins and ends and outlines the authority granted. There are different types of power of attorney documents:
- A limited power of attorney gives the agent authority for a specific timeframe or task. For example, they may act on the principal’s behalf in a real estate purchase. They take on the role of agent and can sign legal documents related to that purchase. Once the purchase is complete, their authority ends. Or a principal can date a power of attorney when they are unavailable (for example, traveling outside the country). The power of attorney limits the authority to that specific timeframe.
- A springing power of attorney becomes effective when an event or particular situation occurs. Usually, that situation is the principal’s incapacitation, meaning when the principal can no longer manage their affairs.
- A durable power of attorney is effective once signed unless the principal specifies another effective date. This power of attorney remains in effect even if the principal is subsequently incapacitated, thereby making it “durable.” This type of power of attorney ends upon the principal’s death or by revocation by the principal.
This article looks at the rights provided by a durable power of attorney document.
The Power of Attorney Form Defines the Powers Given
There are generally three purposes for which a person creates a power of attorney:
- To handle financial decisions
- To handle medical decisions
- To handle all decisions in case of incapacity (addressing both financial and medical decisions)
Financial Power of Attorney
A financial power of attorney gives an agent authority to handle financial matters on behalf of the principal. The agent has a fiduciary duty to act in the principal’s best interest in all financial affairs.
Within the financial power of attorney document, the principal may grant the following powers:
- Buy or sell real estate
- Manage stocks, bonds, securities, and financial investments
- Exercise rights to buy or sell securities
- Handle all banking activities
- Access a safe deposit box
- Take out a loan
- Manage a business entity or buy or sell a business
- Buy or sell insurance policies (Note: They can’t change the beneficiary of an insurance policy.)
- Defend a claim or lawsuit or initiate a claim on the principal’s behalf
- Pay bills, tuition, etc., to support the family’s standard of living
- Handle government benefits such as Medicare, Medicaid, Social Security, and military benefits
- Manage retirement benefits, pensions, and annuities
- Prepare, file, and pay taxes
You can give your agent the right to access all bank accounts, investment accounts, and retirement accounts.
You can give your agent the right to buy, sell, move funds, invest, etc. However, your agent cannot change beneficiaries on life insurance policies, payable-on-death accounts, or trust funds unless you give specific authorization.
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Power of Attorney for Health Care
A medical power of attorney gives a trusted person (the agent) the right to make health care decisions. Depending on the state, this person may be referred to as a health care proxy, health care agent, or health care surrogate.
Usually, the agent is a family member. They typically are not healthcare providers and do not have medical knowledge themselves. Ideally, the agent knows the principal’s wishes either verbally or through a living will or advance healthcare directive.
Within the health care power of attorney document, the principal authorizes the agent to have to right to:
- Access medical information and records
- Make medical decisions
- Authorize medical procedures and treatment
- Choose a hospital or nursing home
- Follow instructions left by the principal
The agent must be able to access the principal’s medical information. With a power of attorney for health care, they can talk to doctors.
General Power of Attorney
A general power of attorney gives an agent broad power to make financial, day-to-day, and medical decisions. Essentially, the agent can make all life decisions for an incapacitated person.
They have the same rights over financial affairs as a probate court grants a conservator of the estate. They can work with the person’s financial institutions to manage their finances. They can buy and sell real estate or a family home (if the power of attorney document specifically states as much).
But they also have a right to make decisions for a person, such as where and with whom they live, what medical treatment they will receive, etc.
Persons suffering from dementia or adult children with severe disabilities may benefit from a general power of attorney. A family member can manage a severely disabled person’s affairs without going through a court proceeding to gain conservatorship.
However, there is a drawback to a general power of attorney. You may prefer having one person as your financial power of attorney agent and another as your health care agent.
Need a Power of Attorney?
A power of attorney conveys strong powers for someone to handle your financial and health care decisions. However, you control your agent’s rights in a power of attorney.
Consider what authority you want to grant your agent. Also, plan to name a backup or successor agent if your first choice is unwilling or unable to serve. In most states, you must sign your power of attorney before a notary public. Know your state’s laws to make your power of attorney legal.
If you need help drafting a valid power of attorney, check out FindLaw’s Estate Planning Forms section for cost-effective solutions.
