Define a Power of Attorney

A Power of Attorney is a document signed by a Grantor, appointing an Agent and giving that Agent authority to carry out certain tasks for the Grantor.

What is a Durable Power of Attorney?

When Powers of Attorney were originally used, they had nothing to do with helping people to appoint helpers in their old age. This is because when Financial Powers of Attorney were invented, people seldom lived into old age.   Under traditional Common Law, a power of attorney went out of effect when the Grantor became disabled. This means that as originally conceived, Powers of Attorney were poor tools to help the elderly.

Various states adopted legislation to make powers of attorney useful in an Elder Law context Statutes now provide that if a Power of Attorney contains language to the effect that the power is intended to survive the disability of the grantor, the Power of Attorney will stay effective until the person dies. The statutes also allow for language that permits the Power of Attorney to come into effect when the Grantor becomes disabled. This latter kind of Power of Attorney is called a "Springing" power of attorney because it springs into effect only upon the happening of  a triggering event.

What is a General Power of Attorney?

A General Power of Attorney permits the Agent to do any legal act that the Grantor of the Power of Attorney can do. This term is deceptive, however. Most Courts will not allow an Agent under a General Power of Attorney to make gifts on behalf of the Grantor unless the General Power of Attorney contains specific gifting authority. Go figure!

What is a Limited Power of Attorney?

A Limited Power of Attorney is one that specifies that the Agent can do certain acts and only certain acts.

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What prevents my agent under a Power of Attorney from stealing my assets?

The Agent under a Power of Attorney is under a high legal duty to act in the interest of the Grantor of the Power of Attorney. This legal duty is called a "Fiduciary Duty". It is a duty of loyalty and conscientiousness that arises out of a special relationship of trust and confidence that is supposed to exist between Grantor and Agent. It is like the duty between lawyer and client This means that if you can find your Agent, you have a right to sue him and win. But you may never collect a judgment.  As a practical matter, when you give someone a Power of Attorney, you are taking a risk that you may lose your assets to your Agent.

Can you require that the agent under a Power of Attorney be bonded?

Yes, if your Agent has a favorable enough credit rating to be bonded It is rarely done, but it could be a good idea!

How does a Power of Attorney compare to having a Living Trust?

  • There is no law that says people have to do business with the Agent under your Power of Attorney (except in Florida). But because your trustee becomes the legal owner of your property, they have to deal with your trustee.
  • Powers of Attorney don't usually contain provisions requiring the Agent to give you a periodic accounting of your financial affairs.
  • The Agent under a Power of Attorney cannot make decisions after your death, but a Trustee can.

Does a Power of Attorney have to be recorded?

It does not have to be recorded immediately after you sign it.  If your Agent has to handle a real estate transaction for you, the Power of Attorney will need to be recorded at the time of the transaction.  Banking transactions and stock transactions ordinarily do not require recordation of a Power of Attorney.

When does a Power of Attorney end?

You can specify and ending date in your Power of Attorney.   If you don't, it ends when you become disabled, if it is not durable.  If it is durable, it ends when you die.

Is a Power of Attorney a substitute for having a Will?

No! A Durable Power of Attorney may survive your disability, but it is not immortal.  When you die, it dies.  So your Agent will, upon your death, lose all power to make decisions for you concerning who is to receive your assets.  Do not rely upon a Power of Attorney as a Will substitute.  Get the real thing!

What happens if the agent under a Financial Power of Attorney benefits himself?

Commencing in August 1, 1998 it became a felony in Arizona for the Agent under a Power of Attorney to benefit from the exercise of his powers as agent.  This was a very strange law, because it is not hard to envision a circumstance where a child of the Grantor takes steps to build or increase a parent's wealth, using a Power of Attorney, knowing full well that he is later to inherit the funds. Has he committed a felony?

The same statute that made it a felony for the Agent under a Power of Attorney to benefit from his own acts contained an "opt out" provision which could be written into the Power of Attorney Document and had to be separately initialed by the Grantor and a witness.

The law is different now. The following statute applies:

13-1815. Unlawful use of power of attorney; classification

A. An agent who holds a principal's power of attorney pursuant to title 14, chapter 5, article 5 and who uses or manages the principal's assets or property with the intent to unlawfully deprive that person of the asset or property is guilty of theft.

B. A violation of this section carries the same classification as theft pursuant to section 13-1802.

Nevertheless, it is a good practice for a lawyer to ask the power of attorney client to specifically initial certain powers to establish that the client specifically read that part of the power of attorney. A prime example is when the spouse is given the power to gift to herself the grantor's interest in the family residence.

What is wrong with a form power of attorney that I bought in an office supply store?

An important use of a power of attorney in an elder law context is to enable a family to conserve assets in the event that the principal has to go into a nursing home.  In order for the power of attorney to be helpful in this regard, it has to permit the making of gifts on behalf of the person who made the power of attorney.  In fact, Arizona law prevents an agent from making gifts under a power of attorney unless his he specifically given a power to gift.  Office supply store powers of attorney rarely contain such gifting provisions.  In fact, there is a good chance that a power of attorney prepared by a lawyer who was not an elder law attorney lacks a gifting clause.