The Power of a Power of Attorney
The Power of a Power of Attorney
By Steve Tingey, Attorney and Counselor at Law
What is a Power of Attorney?
A power of attorney is a letter of instruction. It details what happens if you become incapacitated or are otherwise unavailable. In a power of attorney, you indicate who has the authority to act on your behalf if you are unable to act for yourself. This person is called your “agent” or “attorney-in-fact.” Most people name a couple of alternate agents in case their first choice is unable to serve as attorney-in-fact. A power of attorney also specifies which powers the agent is able to perform. These powers might include things like the authority to deal with banks, brokerages, insurance companies, utility companies, and government entities, such as Medicare, Medicaid, and the IRS.
Why is a Power of Attorney a Good Idea?
To understand why a power of attorney is so important, consider what happens if you do not have one. If you become incapacitated and you do not have a valid power of attorney in place, before your spouse or child or some other close friend or relative can transact on your behalf, they will have to go to court and apply for a guardianship over you and/or a conservatorship over your assets.
Guardianships and conservatorships are the state’s way of ensuring there is due process before depriving an individual of his or her rights and giving another person authority over them. This is generally a good thing because in the United States, our laws protect individual rights. However, most people do not like guardianship or conservatorship proceedings because they are time-consuming, burdensome, and sometimes expensive.
If you already know who you would want to act on your behalf in case you become incapacitated, you can address the due process that our laws require on your own terms before anything happens to you. You can do this with a power of attorney. A power of attorney saves your family the time, expenses, and headache of going through a guardianship and/or a conservatorship proceeding.
What If I Already Have a Power of Attorney?
If you already have a power of attorney, you clearly recognize its importance. However, there are a couple of issues you should be aware of.
1. Is your power of attorney up to date?
Many institutions will not honor powers of attorney that are more than four or five years old. They do this because they want to be absolutely sure that the person claiming to have authority really has authority. If you had your power of attorney done clear back in 2008 (that doesn’t seem very long ago, does it?), you might consider having it redone.
2. Is your power of attorney thorough enough?
A one-page power of attorney generally stating, “I give any and all powers to act on my behalf to …” used to work. However, in recent years, some institutions have rejected this “magic-wand” approach. Today, it is considered the best practice for a power of attorney to specifically list all of the powers that the agent has. For example, you should have specific language regarding power to deal with the banks, the insurance companies, Medicare, the IRS, and so forth.
In conclusion, an up-to-date, thorough power of attorney can be a great tool in your estate plan. It can help ensure that in the event you are incapacitated, a close loved one can step in and seamlessly act on your behalf without having to go through the court guardianship or conservatorship process