A power of attorney is an important document for everyone to have. If you conduct business in a different state, for example, a power of attorney can give a person you appoint the legal authority to represent you in business, financial or legal matters. In addition, if anything ever happens to you where you are unable to handle your personal financial or legal matters, a power of attorney can give someone you trust the authority to make decisions on your behalf. Without it, if you become incapacitated, the courts can take control of your finances.
In any circumstance, a power of attorney is a valuable protective measure to have in place in case you need it. The document is flexible and can be prepared to meet your specific needs. It can be effective immediately or only when you are unable to manage your own affairs.
Yet, even if you have a power of attorney in place, it is important to review it periodically, and potentially replace it with a new document. This can be the result of a change in state law, naming a new person to assist you if necessary, or adding or removing powers from the document.
Power of attorney legally defined
The Uniform Power of Attorney Act defines a power of attorney as a “writing or other record that grants authority to an agent to act in the place of the principal, whether or not the term power of attorney is used.” The agent or attorney-in-fact is the person granted authority to act for the principal. The principal is the individual who grants authority to the agent.
As noted above, a power of attorney can be effective immediately, or only when the principal is incapacitated. Incapacity means the principal is unable to receive and evaluate information or communicate decisions because of a physical or mental impairment. It also can mean that the principal is missing or detained, which includes incarceration, or is outside the United States and unable to return.
Ensuring a uniform power of attorney
The original Uniform Durable Power of Attorney Act, which was last amended in 1987, was largely adopted by a majority of jurisdictions across the country. But most states enacted non-uniform provisions to deal with specific issues that the original act didn't address. Some of the differences included:
- the authority of multiple agents
- the authority of a later-appointed fiduciary or guardian
- the impact of dissolution or annulment of the principal's marriage to the agent
- activation of contingent powers
- the authority to make gifts
- standards for agent conduct and liability
After a lengthy process of review and a national survey, the Uniform Law Commissioners drafted a new Uniform Power of Attorney Act in 2006 to codify legislative trends, and collective best practices to both protect an incapacitated principal and preserve a principal's freedom to choose the extent of an agent's authority and the principles that govern their conduct.
Not all states have adopted the new Uniform Power of Attorney Act, so there are differences in definitions and what is covered between states. According to the Uniform Law Commission website, Colorado, Idaho, Maine, Nevada and New Mexico adopted the Act before 2010. In 2010, Maryland, the U.S. Virgin Islands, Virginia and Wisconsin adopted it. If you live in one of these states and had a power of attorney in place prior to 2010, the document may need to be updated. There is pending legislation in West Virginia, Minnesota, and Ohio. If the legislation passes and you live in one of these states, you may need to update your document.
Some of the provisions to be aware of in those states that have adopted the Uniform Act are those that:
- Recognize that an agent who acts with care, competence, and diligence for the best interest of the principal is not liable solely because he or she also benefits from the act or has conflicting interests.
- Permit a principal to include in the power of attorney an exoneration provision for the benefit of the agent.
- Provide ways for the agent to give notice of resignation if the principal is incapacitated.
- Provide broad protections for the good faith acceptance or refusal of an acknowledged power of attorney.
- Recognize portability of powers of attorney validly created in other states.
- Offer an additional protective measure for the principal by providing that third persons may refuse the power if they have the belief that “the principal may be subject to physical or financial abuse, neglect, exploitation or abandonment by the agent or person acting for or with the agent, make a report to the appropriate adult protective service agency.”
With the arrival of the new year, now is a good time to get organized and make sure that any necessary legal documents, like your power of attorney, are updated.
Uniform Power Of Attorney Act
Uniform Law Commission
Learn more about Power of Attorney