A power of attorney (POA) can play a critical role in legal, financial, and medical matters, especially when individuals cannot manage their own affairs due to absence, illness, or incapacity. Understanding the scope and limitations of a POA document, i.e., what it can do and what it can’t do, is important for anyone considering this legal arrangement.
Authority and Duties of Power of Attorney
A Power of Attorney (POA) can provide another person authority to carry out a wide range of duties on behalf of the principal, depending on the type, terms, and conditions of the POA. However, these actions must always align with the principal’s best interests, regardless of the specifics, and should not unilaterally benefit the person serving under the power of attorney document.
In a POA, the principal person appoints an “attorney-in-fact” to have certain authorities and duties on behalf of the principal. Here are some general powers and duties that an attorney-in-fact might be granted under a Power of Attorney document:
- Financial Management: A POA often takes on broad financial responsibilities. This can include paying bills, managing bank accounts, handling investments, filing taxes, gifting, or buying and selling real estate and personal property.
- Healthcare Decisions: If specifically designated as a healthcare or medical POA, an attorney-in-fact can make health-related decisions when the principal cannot do so. This can include choosing medical treatments, hiring healthcare providers, or deciding on long-term care options, among many other powers.
- Legal Representation:A POA can represent the principal in legal matters. They can lodge lawsuits on the principal’s behalf, defend against legal actions, and engage legal counsel as necessary.
- Engaging Other Third PartiesA POA might hire various professionals on behalf of the principal, depending on the principal’s needs. This can include recruiting caregivers or domestic help, enlisting financial advisors, or contracting property maintenance services.
Throughout this process, it’s important to know that the attorney-in-fact’s actions must always prioritize the principal’s best interests. This means making decisions safeguarding the principal’s financial, physical, and emotional well-being. It’s a position of trust, and the attorney-in-fact is legally obligated to act responsibly and avoid conflicts of interest. An attorney-in-fact should never take any actions that do not serve the best interests of the principal or that solely serve their own best interest, which is referred to as “self-dealing.” An attorney-in-fact should always place the principal’s needs first and should never engage in self-dealing.
Limitations of Power of Attorney
Despite the broad powers an attorney-in-fact under a POA may enjoy, their authority has distinct limitations. These limitations are designed to protect the principal and ensure their wishes and rights remain paramount.
Here are some restrictions that apply to an attorney-in-fact serving under a POA:
- Cannot Create or Amend Principal’s Will:A POA cannot create a Will on behalf of the principal or revise, amend, or revoke any such Will. The power to make a Will is one that is personal to the principal and can only be taken by the principal. This personal document can only be altered, amended, or revoked by the principal while having the mental capacity to do so.
- Must Uphold Fiduciary Duty:A POA is bound by a fiduciary duty to always act in the principal’s best interest. This means they must avoid conflicts of interest, act with utmost good faith, and refrain from exploiting their position for personal gain. They must not engage in “self-dealing.” Violating these duties can lead to legal consequences.
- Cannot Make Decisions After the Principal’s Death: The authorities granted under a POA generally terminate upon the principal’s death. An attorney-in-fact cannot make decisions or transact on behalf of a deceased principal. After the principal’s death, a Personal Representative of the principal’s probate estate (if one exists), or perhaps a Successor Trustee under the principal’s Trust agreement (if one exists), takes over the management and distribution of the deceased’s estate.
- Cannot Violate the Principal’s Rights:A POA cannot override the principal’s rights or ignore their expressed wishes. Even if a POA believes a different course of action may be more beneficial, they must respect the principal’s wishes so long as these wishes don’t lead to harm or violate any laws. Put another way, you will often hear people say, “I have power of attorney over my mom,” for example. However, “power over” the principle is really not the right way to think of a POA. It is better described as the principal has extended your authority and allowed you to act on their behalf; or that you have the privilege of acting on the principal’s behalf.
Remember, a POA cannot simply do whatever they want. The agent is always bound by legal obligations to act in good faith and within the confines of their authority. Understanding these limitations can help the principal and the agent maintain a balanced and lawful relationship.
The Importance of Power of Attorney
A Power of Attorney (POA) is vital for managing affairs when an individual cannot do so due to incapacity, illness, or absence. A POA allows for the efficient and pre-planned handling of unexpected situations, including sudden accidents or illnesses, by ensuring the right persons carry out important decisions and actions.
A POA provides personalized decision-making, reflecting the principal’s values and preferences in various scenarios, from financial transactions to healthcare choices. Beyond these practical benefits, appointing a trusted attorney-in-fact under a POA offers the principal peace of mind, knowing their affairs will be handled competently.
The importance of a POA becomes more obvious the older a person gets older. For instance, an older adult might consider executing a POA to allow an adult child to oversee their financial and medical affairs. Likewise, a frequent traveler might execute a POA to allow a trusted friend, family member, or business associate to manage their home affairs during an extended absence overseas.
The value of a POA is its ability to plan in advance and ensure that a person’s affairs, whether monetary or personal, are handled according to their wishes, regardless of their own capacity or ability to oversee these issues personally.
Understanding the Use of a Power of Attorney
While a power of attorney has significant authority to act on the principal’s behalf, there are clear limitations. An attorney-in-fact under a POA cannot create or change a principal’s will, violate general fiduciary duties, make decisions after the principal’s death, or make decisions that solely benefit the attorney-in-fact and not the principal.
Misconceptions about a POA’s role can lead (at best) to misunderstandings or disagreements or (at worst) to lawsuits, financial abuse, or long-standing family resentments and disharmony. Therefore, it’s important to have accurate information when creating or using a Power of Attorney document.
If you have questions about this issue, a estate planning attorney in Springfield, MO can help you understand the legal risks and the best path forward.
A POA is a very important document, a serious responsibility, and a crucial part of an estate plan. A qualified estate planning attorney can advise you on the many aspects of POAs, including the different types of Power of Attorney when the documents go into effect, how long each will last, what specific or general powers and authorities should be or will be conferred thereunder, and what persons will be best suited to serve as attorney-in-fact.
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