Last Updated: October 28, 2019
At A Place for Mom, we often receive questions from our beloved communities regarding powers of attorney (POA).
By learning from these misconceptions about a POA, you will get answers to some of the most frequently asked questions, including who should draft the signed document and when a durable POA may be needed.
Get answers to some of the most frequently asked questions about a POA by learning from these misconceptions:
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Someone cannot appoint a power of attorney (or sign any legal document) if they are incapacitated.
According to Furman, this is one of the most common misconceptions about the power of attorney. “So many times I get a phone call from someone who says ‘I just got certification from my dad’s doctor to state that he is not competent so I can have you do a power of attorney and living trust for him,’” he says.
Contrary to popular belief, only a mentally competent individual can appoint a POA for themselves. However, because this misconception is so wide-spread, Furman wrote about it in detail in “The ElderCare Ready Book.” In Chapter 10, “Famous Last Words,” Furman writes:
“For some reason, people do not grasp the concept that one needs to be competent to execute legal documents. I understand that people generally look at what they need to get accomplished first; for example, accessing a bank account because dad is not able to anymore. However, at some point, they are told, informed or just believe that dad must have lost their legal capacity prior to the signing of a power of attorney or living trust. This is just backwards! Once Dad lacks legal capacity, then he can no longer sign any legal documents including a power of attorney or living trust, which was intended to be used if Dad became incompetent. The only recourse is then a conservatorship or guardianship proceeding through the court, which is a very costly and time-consuming process.”
Power of attorney forms may be found online, however, it is heavily ill-advised to use.
A power of attorney should be created to appropriately represent the specifics of the unique circumstances and the decisions and care that need to be made on behalf of the person. “People should stay away from the internet and have a power of attorney custom drafted to your circumstances,” Furman advises.
Getting a power of attorney document from the internet means that you could be paying for a document that::
“If a power of attorney is ambiguous it is ripe for challenges and interjections,” Furman says. “The issue is that when problems with a power of attorney are discovered it is usually too late to do anything about it.”
By law, the agent under a power of attorney has an overriding obligation, commonly known as a fiduciary obligation, to make financial decisions that are in the best interests of the principal (the person who named the agent under the power of attorney).
A power of attorney doesn’t grant full financial rights regarding assets. “Based on fiduciary obligations, just because it says you have the power doesn’t mean you have the right,” Furman explains. “The right to act is based on fiduciary circumstances. If the action is not in the best interests of the principal then, notwithstanding that you have the power to act, you do not have the right to act,” he says.
“It’s important that people understand that this fiduciary obligation is not stated in the power of attorney, and it doesn’t need to be because it is implied by law,” Furman says. “The fiduciary obligation is an aggressive restriction placed on the agent under a power of attorney” to protect the principal.
People hesitate towards getting a power of attorney because they are worried that the agent will mismanage their affairs and assets. Legally, your agent shouldn’t do something that is not in your best interests — that is their fiduciary obligation to you as your agent.
However, it can’t be emphasized enough that you must appoint someone you trust. Furman advises that you try to choose someone who is trustworthy and has integrity, especially if their power of attorney is going to extend after you are incapacitated.
The principal determines the type of powers to grant their agent in the power of attorney document, which is why it should be drafted by an experienced attorney in the court so that it covers the principal’s unique situation.
With that being said, there are types of powers of attorney people frequently about. These include:
What is a General Power of Attorney?
A general power of attorney governs all financial powers covered by a power of attorney (like buying or selling a property or otherwise managing one’s assets). However, the specific language of a power granted will depend on the decisions outlined in the signed document. The powers in a POA are specific, especially when custom drafted. The agent needs to check the POA document to see if the necessary authority over the principal’s affairs has been granted.
What is a Limited or Special Power of Attorney?
A limited or special power of attorney does not have all powers. For example, a power of attorney could be drafted, which only grants the power to conduct a real estate sale for the title of one property.
In California’s Probate Code, there are exceptions to the rule about what powers general POA grants. Although this law can vary by state: “In California if certain powers are not expressly written in the general power of attorney then they still don’t exist,” Furman explains. “For example, the power to gift, the power to create a trust on behalf of the principal, the power to disclaim a gift — if these powers are not expressly written in the general power of attorney then they don’t exist — even with a ‘catch-all’ clause in the document, such as a phrase saying ‘all other powers are granted,’ they don’t exist unless they are specifically written in,” he says.
A Health Care Advanced Directive (HCAD) allows an agent to manage health or medical decisions for the principal should he or she become incapacitated. This document is meant to give guidance for the principal’s health care (about the principal’s wishes to remain on or off life support among other health-care related situations).
A Physician’s Order Regarding Life-Sustaining Treatment (POLST) is not a power of attorney. This document is a directive for doctors and first responders who need to know the principal’s resuscitation wishes in an emergency health situation.
What is a Durable Power of Attorney?
A durable power of attorney can withstand the mental incapacity of the individual, but not death. A durable POA allows the agent to continue to act on the principal’s behalf, even if the principal is mentally incompetent. This authority is often granted to trusted agents who can manage the duress of end-of-life medical care decisions regarding health, as they may be faced with these important decisions once the principal can no longer express his or her wishes.
Occasionally, the court may terminate the durable power of attorney documents in the case of divorce, so there needs to be specific wording in the signed document that clarifies whether the managing of affairs extends in this case.
All powers of attorney terminate in the event of death. As such, once a person has passed away due to health issues, the authority granted to the agent under the power of attorney terminates.
What is the Difference Between Power of Attorney and Durable Power of Attorney?
Power of Attorney broadly refers to one’s authority to act and make decisions on behalf of another person in all or specified financial or legal matters. It also refers to the specific form or document that allows one to appoint a person to manage his or her affairs. Durable POA is a specific kind of power of attorney that remains in effect even after the represented party becomes mentally incapacitated.
General Power of Attorney vs. Durable Power of Attorney?
The key difference between a general POA and a durable POA lies in incapacity. Regular powers of attorney all terminate if the principal dies or becomes incapacitated — meaning that the agent can legally engage in business on behalf of the principal until the principal dies, is mentally incompetent, and/or can no longer make informed decisions independently.
Once either of those events occur, the power of attorney is no longer valid. This general power of attorney might be useful if the principal is out of the country or otherwise indisposed, but the durable power of attorney is needed if the principal is no longer capable of making crucial decisions about health care on his or her own.
What Does a Durable Power of Attorney Mean?
In regard to a durable POA, the word “durable” specifically means that the effectiveness of the assigned power of attorney remains in effect even if the principal becomes mentally incompetent. Typically, there are four situations that would render powers of attorney null and void:
The durable power of attorney was created to allow the assigned power of attorney to remain in effect after the principal becomes mentally incompetent. Mental incapacity is defined as a person being unable to make informed decisions. Additionally, mental incapacity can include persons incapable of communicating decisions, or persons with medical concerns relating to disease or injury (such as a coma or unconsciousness). Lastly, it can also refer to a poor state of health where the person is mentally disabled or incapacitated.
Do you have additional questions about a durable power of attorney? We care about giving you answers! We’d like to hear your stories in the comments below.