Power of Attorney

Power of Attorney Explained

The following article is a brief summary of the concept of a "Power of Attorney". Remember the two most important facts about a Power of Attorney: first, the person granting it (the "Principal") must be competent and second, it is of no further effect upon the death of that person.

A “Power of Attorney” is a document that allows an individual to appoint a person or bank to manage his or her affairs if he or she is unavailable or unable to do so. The person or bank appointed is referred to as an "Attorney-in-Fact" or "Agent."

A General power of attorney authorizes the Attorney-in-Fact to act on behalf of an individual in several of different situations. A general power of attorney is very broad and provides extensive powers to the person or bank appointed as the Attorney-in-Fact.

These powers are set forth in the Indiana Code at IC 30-5-5 and they usually include: banking transactions, safety deposit boxes, transactions involving U.S. bonds and securities, buying and selling real estate, settling claims, managing stocks and bonds, making gifts, filing tax returns, matters related to government benefits, making gifts, maintaining and operating business interests, and disclaiming interests (this has to do with estate planning strategies to avoid estate taxes).

A general power of attorney is usually used to allow the agent to handle all of the principal's affairs during a period of time when he or she is unable to do so. And a general power of attorney is often included as part of an estate plan to make sure that the principal has covered the possibility that he or she might be incapacitated.

A Special Power of Attorney authorizes the Attorney-in-Fact to act on someone’s behalf in specific situations only, such as a real estate transaction.

A Health Care Power of Attorney authorizes the Attorney-in-Fact to appoint someone to make health care decisions for the person who may be incapacitated.

The concept of a Durable Power of Attorney can be included in the general, special and health care powers of attorney. They can each be made "durable" by adding certain language to the document. This means that the power of attorney will remain in effect (or take effect) if the principal becomes mentally incompetent. If he or she becomes mentally incompetent while a power of attorney document is already in effect, a durability provision will allow the document to stay in effect. One can also sign a durable power of attorney document to prepare for the possibility that he or she may become mentally incompetent due to illness or an accident. In this case, he or she would specify that the power of attorney would not go into effect unless a physician certifies that he or she is mentally incapacitated.

Other considerations for all parties involved: The attorney in fact can be held liable for intentional misconduct. In other words, deliberately performing an act that is either not permitted by the document or intentionally going beyond the powers allowed to him or her.

Generally, the document provides for a successor agent. In the event that the person named in the power of attorney is incapacitated, dies, or unable to serve for any reason, a successor assumes the role as agent. This is particularly important if a husband and wife hold powers for one another and both are elderly. In that case, a younger person should be named as successor.The document must be notarized to ensure that there is no issue as to its validity. In addition, it allows the document to be recorded if it being used to effect the transfer of real estate on behalf of the individual granting the power of attorney.

A power of attorney is different from a guardianship. As explained in a companion Article on this site, a guardianship requires court approval. While many of the powers are the same, the requirements for obtaining each are very different.

Finally, a Power of Attorney can be revoked by the person making it.