A Power of Attorney is a record, usually in writing, in which one adult, the principal, designates one or more agents and grants the agent(s) the authority to act in place of the principal. The agent is the principal’s fiduciary and must put the principal’s interests above his own. There are different types of powers of attorney that address different needs. This article will discuss medical powers of attorney and durable powers of attorney.

Medical Power of Attorney

Under an MPOA, the principal gives the agent authority to make most health care decisions on the principal’s behalf if the principal becomes incompetent. The principal’s competency is determined by the principal’s attending physician. If the principal is competent, the agent has no authority under the MPOA. In some case the principal may not regain competency, and the agent will make healthcare decisions for the remainder of the principal’s life. It is important that the agent understands the principal’s wishes and is someone the principal trusts to make decisions that are in the principal’s best interest and consistent with his or her wishes.

Durable Power of Attorney

Under a DPOA, the principal gives the agent authority to manage the principal’s property, finances, and to handle other business and non-medical personal matters. The powers given to the agent often include the authority to buy and sell real estate, personal property, stocks, bonds, and commodities; the authority to manage bank accounts, investment accounts, insurance (including the authority to designate beneficiaries and change beneficiary designations on those accounts); the authority to manage various government benefits; the authority to handle tax matters, claims, and litigation matters involving the principal; and the power to gift the principal’s property. A principal may limit or extend the agent’s powers under a DPOA.

A DPOA can be a great tool for assisting a loved one who becomes incapacitated or who needs help managing his or her affairs. Unlike a MPOA, a DPOA may become effective at the time it is created and is not affected by subsequent disability or incapacity of the principal, or it may become effective upon the disability or incapacity of the principal.

Powers of attorney are also used to allow the agent to conduct a specific transaction for the principal, or to allow an agent to act for a given period of time while the principal is not available or able to act.

Agents

The agent is given significant power and authority over the principal’s property and health care. Often a principal is trusting his very life and his entire livelihood to the agent. Unfortunately, this trust does get abused. Agents engage in self-dealing, or they flat out steal everything from the principal. When the principal is incapacitated, there may be no one overseeing the agent’s activity. Therefore, selecting a trustworthy agent is of the utmost importance. The agent should also be competent, willing to serve, and qualified to handle the job. When selecting an agent, the principal should also consider where the agent lives, the nature of the relationship with the agent, and the agent’s age and health condition. All things being equal, an agent that lives near the principal will usually be more effective. A person that is the same age as the principal or in poor health, may not be available to serve when the need arises. A principal may designate alternate agents if the primary designee is unwilling or unable to serve. Many times, an alternate will become the agent, so it is important to carefully evaluate the alternates as well.

A principal may designate two or more co-agents. However, just because you can do something does not mean you should. Co-agents have equal authority and may not be able to act independent of one another. Co-agencies are usually tedious and inefficient. There must be consensus before taking any action, and it is hard to find two people who will agree on everything. When co-agents become deadlocked, a court may ultimately have to resolve the dispute, which is a slow and expensive process. If there is an odd number of co-agents, the majority usually rules, but more agents usually equal more problems. The upside to co-agents is that each agent has oversight over his counterpart’s activities regarding the principal.

Often, a principal’s only reason for designating co-agents or naming a certain alternate is to prevent hurt feelings or resentment among children. Many times, the child whose feelings were spared does not play well with others and ultimately does more harm than good to the principal and to his relationship with his co-agents/siblings. Give careful consideration to the person(s) you designate as your agent.

Death

A Power of Attorney is not effective once the principal dies, and the agent loses authority. The reasons are obvious with an MPOA; however, agents under a DPOA do not always know that they no longer have power. When the principal dies, title to his property immediately vests in his heirs, devisees, or designated beneficiaries — the principal no longer owns property for the agent to manage. Additionally, the powers given under DPOA vest in the executor named in the principal’s will, or they may be granted to an administrator if there is no will. Regardless, the agent loses DPOA powers even if there is no estate administration.

Guardianship

There are two types of guardianships — a guardianship of the person and a guardianship of the estate. When a guardian is appointed, the guardian’s authority trumps any competing authority given under a power of attorney. Powers of attorney are a favorable, less restrictive alternative to guardianship because the principal retains rights that would be taken under a guardianship. The two can also be used together. For example, a principal may have a guardian of the person, which trumps the MPOA, but the principal’s DPOA agent may manage the principal’s estate.

There are several things to consider with regard to powers of attorney. This article offers a limited amount of information and is not comprehensive. It is not intended as legal advice. For more information on powers of attorney, consult with a qualified attorney.

RYAN T. WEBSTER is an associate at Alagood Cartwright Burke PC and can be reached at rwebster@denton law.com and www.dentonlaw.com.

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