With everything a power of attorney, or POA for short, can do, it’s a tool every adult should use to their benefit. But what is a POA? How does a POA work? And what happens if you don’t have a valid California POA?
A power of attorney is a legal document where the person signing it, known as the “principal,” gives another person, known as the “agent,” the ability to carry out specified tasks or transactions on the principal’s behalf. For example, Paula knows she will be on vacation when it’s time to sign a contract, so she creates a power of attorney naming her brother Andrew as her agent to sign on her behalf.
Although it might sound like it’s all about lawyers, the person you choose as your power of attorney does not have to be a lawyer; just a competent adult. “Competent” here is meant in the legal sense of “not incapacitated”. For practical purposes, the agent should also have a valid ID. The most important qualification is that this person be ethical and trustworthy.
A general power of attorney gives the agent broad powers to do almost anything in place of the principal. Under a general POA, the agent can buy, sell, enter into debt, apply for government benefits, open mail, care for pets, file taxes, and take many other actions as if they were the principal.
By contrast, a specific power of attorney gives the agent a power for a specified task, such as the specific POA many people sign to allow their tax professional to receive and respond to tax notices on their behalf.
Powers of attorney can also be durable or springing. Under common law, a power of attorney would expire when a principal becomes incapacitated, as the principal can no longer review decisions or hold the agent accountable. A durable power of attorney goes beyond this by specifically stating that it is intended to last even if the principal later becomes incapacitated.
What does incapacitated mean in a legal sense? A person is incapacitated when he or she loses the ability to think, understand, or make decisions. This can be due to age, injury, or illness such as dementia.
A springing power of attorney takes that a step further. It only becomes effective after a person is declared incapacitated. This is useful for many clients who are currently healthy and handling their own tasks, but want protection in case they later become incapacitated.
Common questions:
“My spouse is already incapacitated. Can he still sign a power of attorney?” Unfortunately, once a person loses the ability to understand and consent to decisions, it’s too late to sign a power of attorney. If the condition is permanent, the healthy spouse may find herself unable to downsize homes or take on a second mortgage, unless she files for a time-consuming court proceeding called a conservatorship. Once this happens, only a conservatorship would give the healthy spouse the ability to sign on behalf of the incapacitated spouse.
“Is a power of attorney valid after the principal dies?” No. The POA can only grant the agent powers that the principal has. As soon as the principal dies, the POA is no longer effective because the principal no longer has any powers. The other provisions of a comprehensive estate plan, such as the will or trust, will control what happens next. That’s why it’s so important to avoid DIY disasters and call a California estate planning attorney to make sure everything works when you need it.
“My sibling is using the POA to take advantage of my parent. Is this legal?” It depends. An agent under a POA has a “fiduciary duty,” meaning a duty to act in good faith on behalf of the principal. Generally, this means that the agent cannot use the POA to do things for himself that don’t benefit the principal. However, some powers of attorney have terms that override that, specifically allowing a child acting as agent to give themselves gifts or sell things to themselves. If you’re worried about your parent, call a qualified elder law attorney or Adult Protective Services in the county where your parent lives.
“What happens if I don’t have a POA?” If you become incapacitated, nobody will be able to manage personal and financial decisions for you until a court gets involved. It will be a time-consuming and expensive process that could have been avoided with this small but mighty document.
Have more questions about how a power of attorney can benefit you? Schedule a consultation today to find out how a power of attorney is part of your comprehensive estate planning.