What is Power of Attorney and Why Do You Need It?

09-10-2019

Simply put, a legal document called a “power of attorney” is a written agreement for someone (an agent – a person or persons designated by you) to act on behalf of another person (a principal – you) in personal and business matters. A person usually wants to delegate a power of attorney (POA) in the event that he or she becomes incapacitated, or otherwise incapable of handing his or her own affairs. There are different types of POAs that you should be aware of.

  • Limited vs. Unlimited. A limited power of attorney is specific as to what type of authority the agent will have. You make a list of the matters for which the agent will be able to make decisions. A limited POA often covers a single process or matter, like giving someone the right to sign a work document if you are absent due to illness. You can also limit a POA to a single area of responsibility, such as the handling of finances by an investment advisor. Lastly, a limited POA can concern only a specific period of time, for example, if you will be temporarily absent from your home and need the agent to carry out business decisions on your behalf.  On the other hand, a power of attorney that is not designated as limited will allow a broader range of actions, generally whatever authority is specified in the document itself. There are a few powers that a POA cannot grant, however – for example, the ability for your agent to make a will for you.
  • Durable vs. Non-Durable. Whether it is limited or not, a “durable” power of attorney remains valid after you have become incapacitated and are unable to make decisions for yourself. Without a durable POA, nobody can act for you in the event that you become mentally incompetent or physically incapacitated, unless appointed by the court. In general, all powers of attorney that are prepared nowadays as part of an estate plan will be a durable POA.  Non-durable POAs, which expire when you become incapacitated – thereby  defeating the entire purpose – are rarely used in modern times.
  • Springing vs. Non-Springing (or Immediate). A springing power of attorney becomes effective sometime in the future when a specific event occurs, generally when you become incapacitated, either mentally or physically. Durable vs. non-durable, explained above, determines when the power ends (i.e. does the power end when you become incapacitated?), but springing vs. non-springing determines when the power begins. So a springing POA would say “While I am of sound mind and body, nobody else can act on my behalf. If I become incapacitated, then my agent can act.” A non-springing, or immediate POA, as the name implies, is effective immediately upon signature.  This type of POA says “Even though I am fine, I want this other person to be able to act on my behalf right now.”  Obviously, it is essential to use caution if you are thinking about an immediate POA, since you are effectively giving away the keys to the kingdom. 
  • Medical POA/Living Will vs. “DNR” or “POLST”. Many states still use the term “Medical Power of Attorney” and/or “Living Will” to describe a document that lets you name someone who can handle health-care and medical decisions on your behalf should you become unable to make those decisions yourself, and to express your wishes about end-of-life decisions. In California, these terms have been eliminated and replaced by the term “Advance Health Care Directive” (AHCD). Your specific wishes can be clarified in the document or you can merely name a trusted person or persons to make decisions for you when the time comes, without including any specifics. In general, it is better to put down your own wishes in writing, though, rather than leave that burden to a loved one. This can include deciding whether you wish to be an organ donor, at what point you want life-sustaining treatment to be ended, and whether you want to give your health care agent the ability to sign a “Do Not Resuscitate” (DNR) order on your behalf.  In California, a “Do Not Resuscitate Order” is called Physician’s Orders on Life Sustaining Treatment (POLST), and it goes one step further than an AHCD. An AHCD can only specify that treatment necessary to keep you alive can be removed, if its removal would result in death (for example, artificial respiration). A POLST, which can only be authorized by a doctor, and only at the end stage of a terminal illness, allows for medical personnel such as EMTs to not even attempt life-saving measures such as CPR. So if you have an AHCD but do not have a POLST, then lifesaving measures such as CPR willbe tried, and it is only if you are alive solely because you are on life-sustaining machinery that the AHCD would become relevant and would allow removal of that machinery.

Delegating a power of attorney is an important decision that can have a big impact on you and your loves ones. Anyone over the age of eighteen can set up a power of attorney, and given the various POA types and legal complexities involved, it is best to have an attorney guide you through this process. Even if you (or someone at least eighteen you know) does not want to set up a financial power of attorney, everyone age eighteen or over should have an advance health care directive. There are too many stories of college students ending up in the hospital after car crashes or drug incidents, with their own parents absolutely unable to make any decisions for them, because once you are eighteen, legally there must be a health care directive or a court order for anyone else to act on your behalf. The California statutory form is available for free online as a fillable .pdf – just fill in a few blanks and print it out, and then get it notarized. If you do nothing else, at least take this step!

Julie Richardson provides comprehensive estate and trust planning services, including designating your power of attorney. She will explain all of the different options in terms that you can easily understand, and will make sure that you make an informed decision that best meets the needs of you and your loved ones. Please don’t hesitate to contact Legal Pathways online or call us at (209) 529-1085.

As a bonus for back-to-school time, if you have minor children and you contact us in September to book an appointment, we will give you a $300 credit towards your estate planning package.