What Everyone Should Know about Powers of Attorney ~ An Estate Planner’s Perspective
By James F. Anderson, Esq.
Powers of Attorney sometimes seem to be the black sheep of the estate planning family. Trusts and Wills get all of the headlines while Powers of Attorney are forgotten. That is a mistake. Powers of Attorney are versatile documents that can dramatically improve a person’s day-to-day life at minimal cost. As an estate-planning attorney, I have spent a lot of time educating people about the benefits of having well-drafted Powers of Attorney. Here are 6 important elements that I wish more people understood about Powers of Attorney.
1. A Power of Attorney is Given, Not Obtained
Occasionally, my office receives phone calls that are some variation of the following. “Hello, my name is Tim. My mother has been admitted to the hospital, and she’s in a coma. I need power of attorney over her.” Unfortunately, neither Tim, nor anyone else, can execute a power of attorney granting themselves the power and authority to act on someone else’s behalf. Instead, a person, like Tim, needs to be given that authority by that other person, which must be done when that other person still has mental capacity to understand and enter into the agreement. Only then is the Power of Attorney valid and effective.
2. Two Distinct Types of Powers of Attorney Usually Exist
A Power of Attorney allows one person, referred to as an Agent, to act on behalf of another person. It is possible for a Power of Attorney to encompass all conceivable actions and decision-making. However, it is common to separate this broad authority into two distinct Powers of Attorney.
- A Healthcare Power of Attorney (HPOA) is focused exclusively on empowering an Agent to make and implement medical/healthcare decisions.
- A Durable General Financial Power of Attorney (DGFPOA) empowers an Agent to make and implement all non-healthcare related decisions such as buying and selling property, hiring professionals, making gifts, changing residences, etc.
3. There is a Difference Between a Healthcare Power of Attorney and an Advance Directive
A lot of people confuse an Advance Medical Directive (or Living Will) with a HPOA. They are often combined and typically drafted to work together, however they are not the same thing. An Advance Directive is focused exclusively on end of life decisions, such as whether, and for how long, life sustaining procedures should be started or continued when a person is in a terminal condition. An Agent may or may not be involved in that process. On the other hand, HPOAs are focused on appointing an Agent to make medical decisions, regardless of whether or not a person’s condition is terminal.
4. An Agent Does Not Have to be a Family Member and Can be Different for Each Type of Power of Attorney
A person is free to name any person they choose as an Agent for their HPOA and DGFPOA - family member or not. In addition, the named Agents in a HPOA are allowed to be completely different from the ones named in their DGFPOA. This allows Agents to be selected for their strengths. A person who is good with record keeping and has a history of sound financial decisions can make a fantastic DGFPOA Agent. A person who operates well under pressure and is comfortable with medical decisions can be a great HPOA Agent. Those two Agents may or may not be the same person.
5. Powers of Attorney are Needed Even for Married Couples Who Own Most Things in Common
Some married couples believe that Powers of Attorney are extraneous and unnecessary because they own “everything” jointly. This determination is usually mistaken. It often neglects assets like Retirement Accounts, Life Insurance, Investment Accounts, and other solely owned assets that are overlooked amongst all of the jointly-owned assets. It also overlooks the reality of certain transactions, like tax filings or the sale of jointly-owned real estate, that require the signatures of both spouses. Without a DGFPOA, the spouse of an incapacitated or unavailable person has no authority to deal with those assets and transactions on their behalf. Similarly, while most states have default rules granting medical decision-making authority for an incapacitated person to their spouse, having to rely on those default rules opens up the possibility of inter-family disagreements and even court fights.
6. You Need A Power of Attorney Even If You Know a Person’s Login and Password Information
Having access to a person’s username and passwords does not give you the legal authority to access that person’s online accounts and interact with them. In fact, if you are accessing those accounts to help their owner, even with no ill-intent, you may be committing federal and state crimes by accessing those online accounts. Both the Federal Government and various States have been consistent in saying that in order to legally interact with online accounts, the person seeking access must have been given express permission by the owner of the account. This requirement even exists for family members. Often the best place to memorialize that permission is in DGFPOA; making Powers of Attorney that much more important as we move more and more of our life online.
We at Arlington law Group are here to support all of your estate planning needs, including the creation of Powers of Attorney. Please feel free to connect with us at www.arlingtonlawgroup.com and schedule a consultation.
This blog post is designed for general information only. The information presented in this blog post should not construed to be formal legal advice, nor as the formation of an attorney/client relationship.