What Is A Power of Attorney?
June 3, 2009
A Power of Attorney is a document that can be used to appoint an individual (Attorney-in-Fact) to manage the affairs of another. This is useful for a time when people become incapable of managing their own affairs, whether through mental or physical disability. It is required that a person be competent to execute a Power of Attorney; an incompetent person may not validly execute a Power of Attorney. Thus, once a person becomes incompetent, it is too late. However, a Durable Power of Attorney executed while competent is not affected by subsequent incompetence and will remain in effect.
Why is it important to execute a Power of Attorney? It is important because if a person becomes incompetent and does not have a Power of Attorney, it may be necessary to begin a guardianship proceeding in court to appoint somebody to take control of the affairs of the incompetent. This is an expensive, time consuming and public proceeding. A Power of Attorney can save all of this hassle and money.
The Power of Attorney can grant many different powers to the Attorney-in-Fact. There can be powers to sell real estate, to liquidate brokerage accounts, to perform banking transactions, to set up trusts, to file tax returns, to prosecute and defend court actions, to make gifts, to change beneficiaries to retirement accounts, and to sell personal property. There are forms that set forth these powers in painstaking detail. However, it is a good idea to attempt to tailor the powers granted to the needs of the particular Client.
The typical Power of Attorney becomes effective immediately upon its execution. However, it is possible to delay the effective date of a Power of Attorney. This is called a springing Power of Attorney. A clause is inserted into the form to say that the Power of Attorney will become effective on a future date, or when a specified event takes place. The specified event is typically a medical diagnosis of incompetence. Some practitioners do not like the springing Power of Attorney because it can be difficult to get a declaration of incompetence from a doctor. While the springing power of attorney has not achieved widespread use, it can be useful in the right situation.
Banks are required by South Carolina law to accept a statutory Power of Attorney as long as there is a statement in the power of attorney that they will have no liability for honoring said power. This being said, it is a good idea to ask your bank if they have their own preferred Power of Attorney form. If your bank does, you should bring this form to your attorney and have it filled out, executed, and delivered to your bank. I keep such bank powers of attorney on hand in my office for your convenience. You want your Power of Attorney to be honored. The time spent filling out the bank’s preferred Power of Attorney form can save some headaches later on.
The Power of Attorney is an extremely powerful document. It is essential that the Attorney-in-Fact be a person of extreme trust and confidence. An Attorney-in-Fact is a fiduciary, and as such, owes the utmost care, good faith and loyalty to the incompetent person. An Attorney-in-Fact can be subject to litigation in the case of a failure to act in the best interests of the incompetent person. The nomination of an Attorney-in-Fact must not be taken lightly.
Like any decent lawyer, I need to add a disclaimer here: unfortunately, it is impossible to offer comprehensive legal advice over the internet, no matter how well researched or written. And remember, reviewing this website and my blogs doesn’t make you a client of my Firm: before relying on any information given on this site, please contact a legal professional to discuss your particular situation.