Powers of Attorney
The Power of Attorney is a legal instrument in which an appointed person (the “attorney-in-fact”) is granted the legal authority to act for and in the name of another person (the “principal” or “grantor” of that legal authority). There are several different kinds of powers of attorney, each of which serve a specific purpose. Within the context of Elder Law and Special Needs Law, powers of attorney are most often used when planning for the principal’s incapacity or, even where the principal is not incapacitated, to enable the principal to meet her care needs and goals (such as allowing the attorney-in-fact the power to make gifts, transfer real estate, reduce taxes, protect property, gain unfettered access and use of the principal’s bank accounts and other liquid assets, and avoid the uncertainties, restrictions, humiliation and expenses of guardianships and conservatorships).
One of the most useful kinds of powers of attorney is termed the “durable” power of attorney, which states that the incapacity or disability of the principal does not limit or otherwise terminate the legal authority granted to the attorney-in-fact. A “limited” power of attorney restricts the powers or authority of the attorney-in-fact in some specified manner. These restrictions may be very restrictive, such as a limited power of attorney for the transfer of negotiable securities (e.g., stock powers), or they may be far less restrictive, such as a durable power of attorney which takes effect only upon certain conditions being met (e.g. only upon the incapacity of the principal) – known as a “springing” power of attorney. Notwithstanding what kind of power of attorney may have been granted (general, durable, or limited), the death of the principal results in the power of attorney no longer being exercisable by the attorney-in-fact.
The law requires that only legal powers specifically and clearly described in the power of attorney form may be exercised by the attorney-in-fact. For that reason, one-page documents stating that the attorney-in-fact may exercise “any powers that are permitted by law” or similar language to like effect may not give the attorney-in-fact sufficient authority to carry out many duties and/or achieve many necessary purposes. We therefore utilize highly customized power of attorney forms containing extensive enumerated powers and tailored to meet the specific needs of our client.
Powers of attorney that have been properly signed, witnessed, and notarized after October 1, 1995, must be accepted and honored by third parties (such as banks, stockbrokers, and insurance companies); however, a third party may require that the attorney-in-fact execute a special affidavit certifying that: 1) The principal is still alive; 2) The principal is not the subject of a pending incapacity proceeding; 3) The principal has not been adjudicated an incapacitated by a court proceeding, 4) The power of attorney has not been revoked or amended by the principal.
As of October 1, 2011, a new Power of Attorney law took effect in Florida. This new law both expanded the legal power and use of the Power of Attorney form and imposed new requirements as to the form and method of execution. For example, the new form provides expanded and useful powers to the attorney-in-fact, but these powers must be specifically enumerated and then initialed by the principal.
An attorney-in-fact is considered a “fiduciary” charged with the responsibility of not abusing the trust and power conveyed by the principal to her. However, from a practical standpoint the attorney-in-fact may have carte blanche to handle the principal’s most vital property and financial resources without accountability or oversight by any third party, including the principal. This provides an opportunity for abuse, misuse, exploitation and misappropriation, and the choice of an attorney-in-fact is therefore a serious and critical decision, as is the scope of any delegated authority.
In the absence of a Durable Power of Attorney, the only recourse that may be available in the event of a person’s incapacity is a guardianship proceeding (also referred to as a “conservatorship” in many jurisdictions). Guardianship proceedings involve the Court determining whether an individual should be declared incapacitated (the more archaic legal term is “incompetent”), upon which the Court may transfer many, if not all, of the ward’s basic rights to the guardian (under Court supervision). Guardianship proceedings can be time-consuming, cumbersome, and expensive. They also cause the alleged incapacitated person to fearful and face varying degrees of humiliation. Moreover, there are substantial costs involved in these types of proceedings, all of which must be met from the financial resources of the ward.
The law favors less restrictive alternatives to guardianship, and the existence of a well-drafted Durable Power of Attorney is one of the best means of avoiding a guardianship. Other advance directives, such as a Designation of Health Care Surrogate (also referred to as a Health Care Power of Attorney), a Living Will, and a Designation of Pre-Need Guardian, all reduce the risk that you or your loved one will be faced with the prospect of a guardianship.
*This article does is not intended to describe all of the many types of powers of attorney that are available or all of the circumstances that apply to the specific types, drafting and use, of powers of attorney. You should confer with your attorney in this regard.