What is a Power of Attorney?
A power of attorney is an instrument wherein one person (referred to as “the donor”) authorizes another (referred to as “the attorney”) to act as the donor’s agent or attorney. The power may be general (authorizing the attorney to deal with all financial matters which the donor could lawfully deal with) or specific (authorizing the attorney to perform certain specific and limited acts).
Often clients are looking to put in place what is referred to as an “enduring power of attorney.” An enduring power of attorney allows the attorney to continue to act for the donor even if the donor becomes incompetent. Having an enduring power of attorney prepared gives the donor the ability to plan for a time in the future when they may not be able to manage their own affairs. With that said, please be aware that these have been used by unscrupulous individuals to take financial advantage of vulnerable parties. When appointing an attorney, the most basic requirement is the donor must trust the attorney to act on their behalf and in their best interests at all times.
A mentor of mine described the giving of authority under a power of attorney as akin to handing the other party a loaded gun. The donor needs to have absolute trust in the attorney, trusting the attorney will act appropriately in the present and the future should the donor become mentally incompetent. Please be aware that unless the attorney chosen manages the donor’s property prudently its value may decline, and that there is always the risk that an attorney misuses the authority given.
Please note, there are various requirements and responsibilities when acting as a power of attorney. If these requirements and responsibilities are not followed, the attorney can be held liable by the donor or the estate of the donor. Should you appoint a power of attorney, it is often good practice to leave the attorney instructions and/or advise them to consult with a lawyer regarding their duties, responsibilities and potential exposure to liability.
It is worth mentioning, that should a person not have a valid enduring power of attorney, committeeship would need to be obtained for any third party to manage their affairs. Obtaining a committeeship over an individual is a court process. In addition to obtaining committeeship, the committee would be required to periodically pass accounts with the court.
DISCLAIMER: The information provided within this article is for general information purposes only and is not intended to be a substitute for legal and other professional advice. Legal and other professional advice is recommended. While every effort is made to ensure that the information provided is current and accurate, all persons involved in the preparation of this article disclaim any warranty as to the accuracy, currency, or absoluteness of the information. The author shall not be responsible nor liable for decisions resulting from, or related to, the information or opinions within the article.