Have you been named as a power of attorney? If you’re stepping into this role for the first time, there are terms and responsibilities you need to understand going forward. This is a vitally important role, and one that can’t be taken lightly.
In short, a power of attorney has the authority to take legal action on behalf of another person–the principal. Let’s take a look at what that means for both of you.
Power of Attorney: A Brief Overview
The two primary types of power of attorney are financial power of attorney and medical power of attorney. While the financial power of attorney’s role concerns legal and financial affairs, the medical power of attorney handles health and medical decisions. For the purposes of this article, we’ll focus on financial power of attorney.
As a financial power of attorney, you have control over your principal’s legal and financial affairs under a certain set of circumstances. In some cases, the principal may turn power over to you of their own accord. Other times, you may take on power of attorney when the principal becomes incapacitated.
If the principal is incapacitated, the power of attorney role shifts to you as long as the power is considered “durable”. Most power of attorney documents are drawn up in that way. It’s possible that the scope or duration of your power may be limited under the power of attorney document, but if not specified, then your authority and duration are unlimited.
Managing Your New Role’s Responsibilities
When you hold power of attorney, you can carry out any transaction, either financial or legal, that aligns with the principal’s wishes. If your principal is incapacitated, then it’s your decision which transactions fall within their best interests.
Some of the responsibilities and transactions you may execute on as power of attorney include:
- Property (real or personal)
- Investments and banking transactions
- Operations and dealings of an unincorporated business
- LLC ownership or voting business stock
- Interests and transactions for beneficiaries related to trusts and estates
- Decisions related to retirement plans, annuities, and insurance on coverages, investment choices, and products
- Legal affairs, to include civil litigation (bringing and defending claims) or contracts
- Support of dependents or personal support
- Government program benefits, including social security, if you are acting as a representative payee
- Matters pertaining to taxes, including dealing with the IRS and revenue departments, in addition to preparing, signing, and filing tax returns
- Estate planning
- Creating or funding trusts
- Gifting
Eye-Opening Life Considerations for a Power of Attorney
Becoming a power of attorney sheds light on the many responsibilities someone may need to take on for you one day. If you haven’t already, consider who you may want to name as your own power of attorney in case you become ill or incapacitated in the future.
In addition, if you have young children, consider insisting that they give you power of attorney on their behalf. Once they become legal adults at age 18, you will no longer be able to represent them in health, financial, or legal decisions because at that point, they will be able to refuse your help.
Power of Attorney Limitations
There are specific limitations for a power of attorney; you aren’t all-powerful even when you’re granted that role. Power of attorney is useful for making sure your loved ones are protected, but there are certain things you don’t have the authority to do. For example, you can’t:
- Change your principal’s will
- Act in ways that are not in the principal’s best interest
- Make decisions once the principal is deceased
In addition, you may have difficulty dealing with transactions from some financial institutions. It’s possible they may be cautious because they could be held liable for executing on a transaction without proper permission. Financial institutions may spend some time making sure they check in with the attorney who prepared your power of attorney document so they can verify its legality. You may be asked to submit a sworn written statement that guarantees your power of attorney is authentic so that the financial institution is released from any liability associated with the transaction.
Take a look at this article from AgingCare.com that outlines the circumstances in which a principal may need more than one power of attorney.
Need More Information?
If you want to know more about your role as a power of attorney, take a look at 24 Hours as Power of Attorney Holder. This article will take you through what a day in your life might look like, now that you’ve been appointed as power of attorney. Click here to read more.