The concept of a Power of Attorney (POA) sounds simple, but there is a lot to know about this important part of an estate plan, says the Rushville Republican in “Financial power of attorney responsibilities.” Whether you are named as someone’s power of attorney or you are considering who to name on your behalf, it is important to understand the terminology, the role and the responsibilities.
The person who signs the POA is called the “principal” and the person to whom authority is given is referred to as the “attorney in fact” or the “agent.”
What powers are given to the person who becomes the agent? In some POAs, there are limits placed on the person, but in most cases the power is “general.” In these cases, the agent can do whatever the principal would do with respect to his or her own property. That includes opening bank accounts, buying and selling property, managing investments, filing taxes, cashing checks and closing accounts. An agent is a considered a fiduciary of the principal, which means that he has a legal duty to act in the principal’s best interest.
Note that, unless specifically authorized in the POA itself, the agent may not change the principal’s will or trust, and he is not permitted to transfer his authority to act as an agent for the principal to anyone else.
There are different types of POAs, and when they become effective, depends on whether they are drafted to be “immediate” or “springing.” A POA that is drafted to be immediate is effective the moment it’s signed by the principal. In contrast, a “springing” POA becomes effective, only when a specific event such as mental or physical incapacity occurs, usually after one or more physicians agree that the principal can no longer make financial and property related decisions on their own behalf.
Does a Power of Attorney have to be recorded? Generally, no it does not need to be recorded. However, if an agent is signing a document on behalf of the principal, and the particular document itself must be recorded with the county (such as a deed to a house) then the agent will likely need to present and record the POA with the county recorder before the deed signed by the agent can be recorded.
Should I appoint multiple agents in my Power of Attorney? Although some people decide to have more than one agent appointed at-a-time, it can lead to some complications. The wording in the POA should generally include language appointing the agents “severally,” so each agent can act independently of the another, if that is appropriate under the circumstances (i.e. the agents agree and get along). Reason being, if one agent lives near the principal and another agent lives much further away, not having the ability to act independently could create problems for the agent and the principal if both agent’s signatures are required.
The agent should remember to keep his assets and the principal’s assets separate. Money should not be intermingled in bank accounts or investment accounts. This is a very important point, since the fiduciary responsibility is a serious matter. The POA can be changed or revoked by the principal at any time, as long as the principal is mentally competent.
When does a Power of Attorney expire? The POA ends upon the death of the principal. After the principal dies, the executor (in the case of a will) or trustee (in the case of a trust) takes over from that point forward.
Speak with your estate planning attorney about making the decisions as to who should be named in your Power of Attorney. It must be someone who you can trust implicitly and who is also willing to take on the responsibilities.
Reference: Rushville Republican (Jan. 22,2019) “Financial power of attorney responsibilities”