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What is a Power of Attorney - and When do I need one?
A Power of Attorney is an extremely powerful piece of paper! It is a document which allows another person to sign your name and/or conduct business or manage health care decisions on your behalf, with the same legal effect as if you had signed or acted in person. (This column will specifically consider the uses of a Power of Attorney for Property, and not the Power of Attorney for Health Care which will be discussed in a later column.)
The person who acts on behalf of another is called an "agent." The person who signed the Power of Attorney and appointed the agent is called the "principal." I often hear a person say, "I am the power of attorney for my parent." This is technically incorrect - what the person should say is that they are the agent for the parent under a Power of Attorney. By law, the agent must act for the benefit of the principal and not for his own benefit. However, the risk of an agent's misuse of the power must be considered before an agent is appointed.
Powers of Attorney are used in many situations where documents must be signed, but a person cannot be present at the signing due to travel, illness or any other reason. The Power of Attorney can be limited to one particular transaction; it may be made effective immediately or on a future date; and it may expire on a date shown in the text of the document. After that date, the Power of Attorney has no effect and the agent can no longer sign or act for the principal.
At other times, the Power of Attorney is designed to be very broad, giving every possible financial power to the agent, and stating the agent's authority will not expire until the death of the principal. This is commonly done as part of an estate plan, and it can avoid the need for a family to open a probate guardianship estate for a family member when he becomes disabled and unable to make financial decisions. In some cases a family member assists an older person to get a Power of Attorney when mental disability seems to be approaching. However, many times a person executes a Power of Attorney well in advance of aging and disability. The truth is we don't really know when it will be needed!
The fact that the Power of Attorney remains effective after the principal is disabled makes the Power of Attorney "durable." This feature is critical to allow someone who is caring for an aging friend or family member to conduct business for the benefit of the principal when they are disabled.
The Durable Power of Attorney can be made effective immediately; or it can spring into effect at a future date or the happening of an event. That event usually is the disability of the principal. The Power of Attorney can define how the principal's disability is determined - often it is proven with a letter from the attending physician. Sometimes it also requires the signature of a spouse or child, if living. It is generally not a good idea to make it effective "when a court determines that I am disabled" because one of the benefits of the Power of Attorney is the avoidance of court involvement in this process at all. NOTE: Even with a Power of Attorney, guardianship cannot always be avoided.
NOTE: A Power of Attorney does not have any effect after the death of the principal. I have heard of agents trying to manage final banking transactions with a Power of Attorney after the principal's death. This is not authorized, and the Power of Attorney should never be used in this way.
There is a law in Illinois called the "Illinois Power of Attorney Act" and it contains a form of Power of Attorney (although other forms of Power of Attorney may be used if they contain all of the required elements.) The form is called the "Statutory Short Form Power of Attorney for Property." It is updated every few years, but an older version of the form is still effective. The Power of Attorney requires signature by the principal in front of a witness and a notary. For self- help on this form you can visit the website of Illinois Legal Aid. (http://www.illinoislegalaid.org/) Because this form is very powerful it is advisable for you to consult an attorney before signing it. The attorney can help you decide the proper effective dates for your Power of Attorney, and whether the form needs to be revised for your unique situation.
Note: This column provides general information related to the law designed to help readers understand their own legal needs. This column does not provide legal advice. Please consult a lawyer if you want legal advice. No attorney-client or confidential relationship exists or will be formed between the reader and the author of this column.
What is a Power of Attorney - and When do I need one?
A Power of Attorney is an extremely powerful piece of paper! It is a document which allows another person to sign your name and/or conduct business or manage health care decisions on your behalf, with the same legal effect as if you had signed or acted in person. (This column will specifically consider the uses of a Power of Attorney for Property, and not the Power of Attorney for Health Care which will be discussed in a later column.)
The person who acts on behalf of another is called an "agent." The person who signed the Power of Attorney and appointed the agent is called the "principal." I often hear a person say, "I am the power of attorney for my parent." This is technically incorrect - what the person should say is that they are the agent for the parent under a Power of Attorney. By law, the agent must act for the benefit of the principal and not for his own benefit. However, the risk of an agent's misuse of the power must be considered before an agent is appointed.
Powers of Attorney are used in many situations where documents must be signed, but a person cannot be present at the signing due to travel, illness or any other reason. The Power of Attorney can be limited to one particular transaction; it may be made effective immediately or on a future date; and it may expire on a date shown in the text of the document. After that date, the Power of Attorney has no effect and the agent can no longer sign or act for the principal.
At other times, the Power of Attorney is designed to be very broad, giving every possible financial power to the agent, and stating the agent's authority will not expire until the death of the principal. This is commonly done as part of an estate plan, and it can avoid the need for a family to open a probate guardianship estate for a family member when he becomes disabled and unable to make financial decisions. In some cases a family member assists an older person to get a Power of Attorney when mental disability seems to be approaching. However, many times a person executes a Power of Attorney well in advance of aging and disability. The truth is we don't really know when it will be needed!
The fact that the Power of Attorney remains effective after the principal is disabled makes the Power of Attorney "durable." This feature is critical to allow someone who is caring for an aging friend or family member to conduct business for the benefit of the principal when they are disabled.
The Durable Power of Attorney can be made effective immediately; or it can spring into effect at a future date or the happening of an event. That event usually is the disability of the principal. The Power of Attorney can define how the principal's disability is determined - often it is proven with a letter from the attending physician. Sometimes it also requires the signature of a spouse or child, if living. It is generally not a good idea to make it effective "when a court determines that I am disabled" because one of the benefits of the Power of Attorney is the avoidance of court involvement in this process at all. NOTE: Even with a Power of Attorney, guardianship cannot always be avoided.
NOTE: A Power of Attorney does not have any effect after the death of the principal. I have heard of agents trying to manage final banking transactions with a Power of Attorney after the principal's death. This is not authorized, and the Power of Attorney should never be used in this way.
There is a law in Illinois called the "Illinois Power of Attorney Act" and it contains a form of Power of Attorney (although other forms of Power of Attorney may be used if they contain all of the required elements.) The form is called the "Statutory Short Form Power of Attorney for Property." It is updated every few years, but an older version of the form is still effective. The Power of Attorney requires signature by the principal in front of a witness and a notary. For self- help on this form you can visit the website of Illinois Legal Aid. (http://www.illinoislegalaid.org/) Because this form is very powerful it is advisable for you to consult an attorney before signing it. The attorney can help you decide the proper effective dates for your Power of Attorney, and whether the form needs to be revised for your unique situation.
Note: This column provides general information related to the law designed to help readers understand their own legal needs. This column does not provide legal advice. Please consult a lawyer if you want legal advice. No attorney-client or confidential relationship exists or will be formed between the reader and the author of this column.
