Powers of Attorney are very common.  At least they seem to be common or perhaps it is just my line of work.  Powers of Attorneys can be misunderstood as well.

Conceptually, granting someone a Power of Attorney is rather simple.  Let us take a simple situation.  You are about to travel out of town.  While out of town you want to make sure that if anything comes up someone will be able act on your behalf.  Your son lives nearby and he is a responsible young adult.  The simplest way to accomplish this goal is to grant your son a Power of Attorney over your affairs while you are gone.  If you grant your son a Power of Attorney, your son will be legally known as your “agent” or “Attorney-in-Fact.”  He will be able to act on your behalf to the extent you grant him the authority.

Power of Attorney’s are that simple.  The person granting the authority under a Power of Attorney is called the principal.  The person acting on the principals behalf is called the agent.  In the above scenario Parent was the principal and Son was the agent.  The agent’s authority derives from the powers granted in the Power of Attorney.

Power of Attorney’s do not last forever.  Let me say that again, Power of Attorney’s do not last forever.  A Power of Attorney will expire 1) when revoked, 2) by the terms of the Power of Attorney, 3) incapacity unless it is a durable power of attorney (discussed below), and 4) on the death of the Principal.   I have talked to numerous people who have indicated — “Well, my Dad passed away last December but I have a power of attorney.”  The authority under the power of attorney ceased when Dad passed away.  In other words, the agent can no longer act on behalf of Dad.  A different set of legal tools would be required to take care of Dad’s estate.  (See the Will/Probate and Estate Planning Section).

I indicated that a Power of Attorney “expires” on the incapacity of the principal.  This is the default rule/law.  A principal can execute what is called a “Durable Power of Attorney.”  This is a special type of power of attorney that allows the agent to act on the principals behalf, even if the principal is incapacitated.  Why is this important?  Well, if you do not have a durable power of attorney and you become incapacitated, the law, judges, and attorneys will decide who will make decisions for you.

Powers of Attorney are common tools in estate planning and other legal transactions.  They are flexible and powerful legal documents.  As the principal, you can give as much authority to your agent for almost any duration during your life or you can grant you agent the authority to act on your behalf in a very narrow way for a very limited period of time.