Shake Logo

Power of Attorney: An Overview

by Whitney O’Sullivan

Power of Attorney: An Overview

You’ve probably heard of a “power of attorney” — a common but often misunderstood legal term.  In a nutshell, a power of attorney is a written agreement that gives another person the authority to represent you in a variety of legally significant situations.

Why Use a Power of Attorney?

When you use a Power of Attorney, the person you appoint to act on your behalf is called the agent, and you’re the principal. There are a variety of reasons you might want to appoint an agent, including:

  • Convenience. Appointing an agent allows you to delegate multiple repetitive (boring) tasks, such as paying your bills, filing tax returns, or applying for health benefits.
  • Unavailability. You can appoint an agent for the purpose of signing a single discrete contract. For example, if you purchase a home but are unavailable to sign the contract yourself, you can appoint an agent to sign it for you.
  • Physical Disability. If you are physically disabled and unable to review and sign extensive paperwork, appointing an agent will allow you to conduct business, with assistance.
  • Incapacitation. You can appoint an agent for the sole purposes of having the power of attorney if/when you become incapacitated. Commonly, “Health Care,” “HIPPA,” and “Durable” powers of attorney are used to plan for this day, and for dealing with medical and estate related decisions.

It is up to you to decide how much power to give to your agent, and when the power will take effect. The power is (almost) as wide or as narrow as a you want it to be.

The power of attorney is (almost) as wide or as narrow as a you want it to be.

What are the Limits on a Power of Attorney?

While you have the ability to generally control the breadth of your agent’s power, the possible powers are not entirely limitless. Limits on a power of attorney include:

  • Termination. You have the power to terminate your power of attorney at any time, at your sole discretion.
  • Gifts. Your agent will never have absolute power over your personal affairs. An agent cannot change or edit your will, nor can an agent gift himself your assets, unless you specifically authorize it.
  • Incapacitation. Your agent’s authority will terminate automatically if you become incapacitated, unless you specifically appointed your agent for this purpose.

What Should You Consider Before Appointing an Agent?

There is a lot to think about before you appoint an agent. Some items you will want to consider are:

  • Goals. It is important for you to clearly understand your reasons for appointing an agent. Ask yourself if appointing an agent will really help you achieve your goals, if it’s necessary, and if there are alternative methods for accomplishing a task.
  • Scope of Power. You may think that granting certain powers will also grant your agent access to specific information, but it may not. Make sure you fully understand what each power you grant encompasses, what it does not, and what additional information your agent might need in order to make informed decisions.
  • Trust. Before opting to appoint an agent, ask yourself whether or not you fully trust this person. Your agent will likely have access to important personal information and ability to transfer your assets. One way to safeguard against improper agent behavior is to appoint multiple agents.
  • Documentation. Before signing over any power, you will want to make sure you understand what you are signing. If you are not clear about what power you are giving to your agent, do not sign anything, and instead seek out the advice of a licensed attorney.

Deciding to grant the Power of Attorney is not a decision that you should make lightly, and it may not be the best instrument for all situations. Remember, if you do decide to grant an agent power, you will still maintain the ability to simultaneously manage your affairs.

What Should Your Power of Attorney Documentation Include?

Generally all grants of power of attorney will need to be in writing, signed by you. The document will need to clearly identify your agent and delineate the scope of your agent’s authority. This will not only set current expectations but will help to prevent future misunderstandings.

You should review your state laws closely for specific requirements and contact a licensed attorney if you have any questions. Remember, precise wording matters.