A Power of Attorney is a legal document that allows one individual to act on another’s behalf. The person granting the powers is called the principal. The person authorized to act on the principal’s behalf is called the agent or attorney in fact.
The Power of Attorney document spells out the powers that you are giving to your agent. If your agent acts within the authority granted to him or her in the Power of Attorney, those actions are legally binding on you. I’ll repeat that again in slightly different words, as it is critically important to understand. Your agent’s actions, so long as they are authorized by the power of attorney document, are legally binding on you. For this reason, before signing a Power of Attorney you should do 2 things:
- Ensure you understand what powers you are granting your agent. Are they broad or narrow? Does your Power of Attorney allow them to sell real estate? Access your bank accounts? Access your digital accounts including your personal e-mail?
- Ensure that you trust your agent. If you don’t trust them, the answer is simple, don’t make them your agent.
What does it mean for a power of attorney to be “durable”?
The agent’s authority under an ordinary power of attorney only exists so long as the principal is of clear mind. If the principal becomes incapacitated, the agent’s authority ends.
Clients often trust family members to continue to act for them even if they are disabled. As such, Missouri law allows individuals to sign a durable power of attorney. Under a durable power of attorney, the agent’s authority continues whether the principal is of clear mind or incapacitated. The durable power of attorney should include the following language:
THIS IS A DURABLE POWER OF ATTORNEY AND THE AUTHORITY OF MY ATTORNEY IN FACT SHALL NOT TERMINATE IF I BECOME DISABLED OR INCAPACITATED OR IN THE EVENT OF LATER UNCERTAINTY AS TO WHETHER I AM DEAD OR ALIVE.
Powers of attorney are powerful estate planning tools. They can be used in the following ways:
- Physical Limitations. Example: an older gentleman has a hard time getting out of the house. Going to the bank becomes a chore that takes all of his energy. He can execute a power of attorney and name his daughter as his agent. Most banks will honor this and allow the daughter to conduct business on behalf of her father.
- Mental Limitations. Example: A mother is diagnosed with dementia or Alzheimer’s disease. Recognizing that her mental functions may diminish with time, she executes a power of attorney allowing her son to pay bills, manage her finances, and take care of her.
- Child Away at College. Example: Child decides to attend college far away from parents. Yet, child’s car is registered in Missouri and he has other accounts in Missouri. Child can give his parents power of attorney to manage his affairs while he is out of the state at college.
Without a power of attorney, if something happens to you, and you need someone to manage your affairs, your family will likely end up in probate court asking the judge for a Guardianship and Conservatorship. This is an unnecessary waste of time, money, and stress.
Take control. Plan ahead. Choose someone you trust. Create a power of attorney.