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What are they and what should be considered in signing them? Powers of attorney are increasingly important documents in a well thought out and effective estate plan. A few years ago, I was asked to explain certain aspects of powers of attorney. The following questions and answers may assist in your understanding of these important documents. 1. What is a power of attorney? What power does an agent under a power of attorney have? A power of attorney is a legal document by which one person, called the principal, appoints another person or entity as his or her agent to perform certain specified acts or kinds of acts on behalf of the principal. A power of attorney can be general, which means that the agent has full power to act on behalf of the principal in all matters, or it can be a special or limited power of attorney which generally means that the agent’s authority is limited to the types of acts or transactions specified. For instance, an example of a special power of attorney is one that might authorize an agent to act on behalf of the principal in connection with the sale of a particular piece of real estate when, for instance, the principal might be on vacation or otherwise unavailable. It is generally desirable that the power of attorney be considered a durable power of attorney which continues in effect after the incapacity of the principal. 2. How do I execute a power of attorney? Do I need a lawyer? A power of attorney is a written document which is best prepared and executed under the supervision of a lawyer who can explain the nature and extent of the powers of the agent and the duties of the agent. 3. Who should I choose to be the agent? While an agent is a fiduciary and is, therefore, subject to a very high standard in monitoring his or her conduct in performing the duties of agent, only the most trustworthy person should be chosen for this responsibility. In addition to the general requirement of being trustworthy, sometimes the nature of the duties of the power of attorney might indicate a certain skill set would best be possessed by the agent. For example, if a business or other financial responsibilities are involved, a person with some business background might be desirable. 4. What are the advantages of a power of attorney? When a principal makes a choice to appoint an agent under a power of attorney, it is often with the view that the principal might become incapacitated/disabled and not otherwise able to handle his or her own affairs. By making this selection, the principal has complete control over who would become the agent and does so in a way that is relatively inexpensive to accomplish. Once the power of attorney is executed, it will often be effective immediately. Without a power of attorney, if someone became incapacitated and unable to handle his or her own affairs, it would be necessary to have a court appoint a guardian of the person or of the estate of the disabled person which can take a good deal of time and also involve a good deal of expense, when compared to the cost of preparing a power of attorney. 5. What are the disadvantages of a power of attorney? If the agent under the power of attorney is carefully and thoughtfully selected and if the agent is looking out for the best interests of the principal, there are very few disadvantages. However, powers of attorney are not always accepted by third parties. In dealing with the Federal government, in connection with social security or other financial benefits, a properly drawn power of attorney will not be accepted in directing how a principal’s government benefits are to be handled. In the case of such a government program, it is necessary to have a “Representative Payee” appointed who may be the same person as the agent acting under the power of attorney, but there are additional steps that need to be taken. 6. What is the difference between a property power of attorney and a healthcare power of attorney? Do I need both? Should they be the same person? A property power of attorney is generally designed to allow the agent to handle business-type transactions on behalf of the principal. Examples of these types of transactions are:
A healthcare power of attorney allows the agent to make personal, not business, decisions for the principal. Examples of this might be authorizing surgery, other medical procedures, making alternate living arrangements for the principal and, assuming the power of attorney is drafted broadly, any other decision dealing with the personal care of the principal which the principal is not able to make for himself or herself. Generally, a person should have both a property power of attorney and a healthcare power of attorney because the purposes are different. In some instances I have seen a property power of attorney and a healthcare power of attorney combined into one document. Since the agent under one type of power of attorney might need to have different skills than the agent under the other type of power of attorney, I usually recommend that separate powers of attorney be executed. It often happens that the same person is the agent under both types of power of attorney, particularly when the spouse of the principal is the person who is named as the agent under the power of attorney. If a principal wanted his or her children to be the agent or successor agent (after the spouse, usually), parents will often make the decision as to who will be the agent, or possibly a successor agent, based on the ages of the children, or based on which child lives closer to the principal, or based on which child has the requisite skills to best perform the responsibilities under that particular power of attorney. 7. What power can I give my health care agent? The answer to this question will depend somewhat on the relationship of the proposed agent to the principal. If it is a spouse or child, it is generally desirable to grant as broad a set of powers to the health care agent so that any decision can be dealt with without having to go to court to appoint a guardian of the person. Even where a non-family member is named as agent, the better practice is to make the power of attorney as comprehensive as possible so that the agent can handle situations which may arise. Particular wishes of the principal may require that the power of attorney be tailored to his or her needs and desires. 8. Who should I choose as a health care agent? I think I have answered that question earlier, but let me re-emphasize that the person should be one in whom you have the utmost trust and confidence to carry out your wishes and to make good and sound decisions for your own care. 9. What if I am competent to make my own health care decisions? From a practical point of view, if you are able to make your own decisions, your health care professionals will ask you first. If an agent under a power of attorney is trying to act for you in a manner in which you do not feel is appropriate, the principal can always revoke the power of attorney or remove the agent, in which case the agent would no longer have legal standing or authority to act on your behalf. 10. If I have a living will, do I need a health care agent? A living will is designed to give instructions to the doctors and hospitals about life support systems. The responsibility and power of a health care agent are much broader than that and, in my view, at least – and I think this is shared by most legal practitioners in this field – it is desirable to have both a living will and a health care power of attorney. A form of living will has been adopted by the General Assembly in Illinois and is available and can be executed at hospitals, social service agencies, or with lawyers. The Iowa State Bar Association has also developed forms for general use.
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