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Power of Attorney

Learn about the different types and importance of power of attorney.

When granting power of attorney to an agent, be sure the person is intelligent and trustworthy. [©Jupiter Images, 2009]
©Jupiter Images, 2009
When granting power of attorney to an agent, be sure the person is intelligent and trustworthy.

Power of attorney grants an agent, or attorney-in-fact, the right to act on another's behalf in business, legal or medical affairs. The person who grants power of attorney is known as the principal or donor. According to the American Bar Association, the agent is authorized to take any action outlined by the power of attorney document.

For instance, the document might specify that the agent is permitted to sell the principal's real estate property, buy and sell securities, sign contracts, or write and endorse checks, among other things. This is mainly done for the sake of convenience; if the principal would rather not handle a transaction, he or she can simply authorize someone else to take care of it.

Agents can also have the power to make medical decisions on the principal's behalf and handle business transactions in the event the principal becomes incapacitated. For this reason, power of attorney plays an important role in estate planning and end-of-life issues.

Different Powers of Attorney

According to the AARP, there are four main types of power of attorney:

  • Limited power of attorney gives an agent the power to carry out specific transactions or types of transactions. An end date could be written into the document; otherwise, it ends when the principal dies or becomes incapacitated.
  • General power of attorney is far more reaching. This document gives an agent the power to act on the principal's behalf in any situation, and ends only when the principal dies, becomes incapacitated or formally terminates the agreement.
  • Durable power of attorney includes a provision that keeps the instrument in effect after the principal becomes incapacitated. Power of attorney documents that do not contain this provision are said to be non-durable.
  • Springing power of attorney documents contain a provision that "springs" them into effect when a specified event occurs -- usually when the principal becomes incapacitated and is unable to make medical decisions or look after business and legal affairs.

Medical Powers of Attorney

According to the Texas Medical Association, medical power of attorney grants the agent the right to make medical decisions on behalf of the principal in the event of the principal's incapacitation. It is effective immediately after it is delivered to the agent, and remains so until a pre-specified termination date, it is formally revoked, or the principal regains competence.

Before the agent can make medical decisions, the physician must sign a document that states that the principal is incompetent and file it with the patient's medical records. Even then, the doctor cannot deny the treatment if the principal objects, even if the principal is considered legally incompetent. Furthermore, limitations can be written into a medical power of attorney. The document can make it clear that the agent is not to override the principal's living will, which may specify that doctors are not to use invasive life-prolonging measures.

The Importance of Power of Attorney

ExpertLaw notes that power of attorney is most needed after an unexpected event, such as a car accident or crippling medical disability. However, power of attorney involves the sort of planning people most often neglect simply because it is very unpleasant to think about. There are several reasons why people should be proactive in planning for the worst.

Should an individual become unable to make important medical or financial decisions, but has not appointed an agent, the family would be compelled to petition the court for guardianship. The guardian the court appoints might not be the person the principal would have chosen. In addition, loved ones might have a difficult time convincing the court of the patient's stated preferences regarding medical treatment.

Appointing an Agent

Individuals have a lot of latitude when choosing an agent to manage their affairs. The person appointed does not have to be a family member, though it frequently is a child, sibling or spouse. The most important thing is that the agent is trustworthy. There is also the option of appointing joint agents, both of whom would be required to sign off on a decision in order for it to be valid.

When preparing an estate plan, many people choose to appoint separate agents: one with medical power of attorney and another with general power of attorney. The person with general power of attorney would be responsible for managing insurance claims, paying bills and managing assets. This is essential in the case of long-term disability -- otherwise, the court might appoint a paid conservator.

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