Estate Planning
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What is Powers of Attorney?
A Power of Attorney or letter of attorney in common law systems or mandate in civil law systems is an authorization to act on someone else's behalf in a legal or business matter. The person authorizing the other to act is the "principal" or "grantor (of the power)", and the one authorized to act is the "agent" or "attorney-in-fact". The attorney-in-fact acts "in the principal's name," signing the principal's name to documents and filing suit with the principal's name as plaintiff, for example.
As one kind of agent, an attorney-in-fact is a fiduciary for the principal, so the law requires an attorney-in-fact to be completely honest with and loyal to the principal in their dealings with each other. If the attorney-in-fact is being paid to act for the principal, the contract is a separate matter from the power of attorney itself, so if that contract is in writing, it is a separate document, kept private between them, whereas the power of attorney is intended to be shown to various other people.
The power of attorney (often called "POA" for short) may be oral—such as asking someone else to sign your name on a check because your arm is broken—or may be in writing. Many institutions, such as hospitals, banks, and the I.R.S., require a power of attorney to be in writing before they will honor it, and they usually want to keep an original for their records.
The "equal dignity rule" is a principle of law that requires a document authorizing someone representing someone else to have been appointed with the same formality as required for the act the representative is going to perform, and it applies to powers of attorney.
A power of attorney may be "special" or "limited" to one specified act or type of act, or it may be "general," and whatever it defines as its scope is what a court will enforce as being its scope. (It may also be limited as to time.) Under the common law, a power of attorney becomes ineffective if its grantor dies or becomes "incapacitated," meaning unable to grant such a power, because of physical injury or mental illness, for example unless the grantor (or principal) specifies that the power of attorney will continue to be effective even if the grantor becomes incapacitated (but any such power ends when the grantor dies). This type of power of attorney is called a "durable power of attorney".
In some U.S. states and other jurisdictions it is possible to enact a springing power of attorney; i.e., a power that only takes effect after incapacitation of the grantor or some other definite future act or circumstance. After such incapacitation the power is identical to a durable power, but, unlike a durable power, cannot be invoked before the incapacity.
Unless the power of attorney has been made "irrevocable" (by its own terms or by some legal principle), the grantor may revoke the power of attorney by telling the attorney in fact it is revoked; however, if the principal does not inform third parties and it is reasonable that the third parties could rely upon the power of attorney being in force, the principal may still be bound by the acts of the agent, though the agent may also be liable for such unauthorized acts.
Many standardized forms are available (usually for free) for various kinds of powers of attorney, and many organizations provide them for their clients, customers, patients, employees, or members. In some states statutory power of attorney forms are available as some individuals have used powers of attorney to unscrupulously waste that assets of vulnerable individuals such as the elderly (see elder abuse).