Powers of Attorney are a major tool in every estate planner and elder law attorney’s toolkit, and the concept has been fairly well ingrained in our cultural lexicon. Perhaps it’s because of that that it never ceases to amaze me how frequently misunderstood they are. It shouldn’t be surprising that a properly informed client does not translate to properly informed children a decade or two down the road, and yet, when my colleagues and I then try to set the record straight for family members, they do not want to believe us.
I have given some thought to what the easiest, proper explanation of a power of attorney is, and if I was pressed to boil it down to a single sentence, I’d go with the following:
A power of attorney is a document that allows an individual to share with another person their own ability to manage their money and property and make legally binding agreements on their behalf to the extent specified in the document.
However, since my goal is to provide a well-rounded discussion in these blog posts, and there’s no shortage of space, I’d like to break down a few key parts of that definition for those who are interested.
A power of attorney lives and dies on the wishes of the person giving the power. It is much more a one-way gift than a two-way contract, and the giver can take it back at any time just by telling you they’re revoking it. They don’t need to file anything with a court or town hall (in CT, MA and most other places). They don’t even need to put it in writing, and if you continue to use it anyway you are engaging in criminal and civil fraud. That’s true even if you know the person is not in the right state of mind, even if as a practical matter that makes you more inclined to risk it.
This one word is both an extremely fundamental and frequently misunderstood part of how powers of attorney work. A POA document sets every power-holder on a parallel track with the power-grantor, with the same abilities, and the same limitations. That means, among other things –
- If Mom or Dad give you a power of attorney, it does not mean you can lord it over them and force them to sell the house or move against their will. It also doesn’t mean you can take control of their finances unilaterally. They didn’t relinquish their rights, they’re just sharing them with you.
- One power of attorney doesn’t revoke another. Wills and most healthcare directives would, but a POA does not. If you receive a power of attorney over someone, and someone else also has one, even if it was done many years ago and with very different family circumstances, you are both equals in terms of authority. The only exception to this is divorce, which automatically revokes a POA given from one ex to the other during the marriage (in many states).
- Powers-holders and the power-grantor can all undo each others actions. Usually if a significant back-and-forth develops, either the power-grantor will revoke the power, or one of the power-holders will appeal to the probate court to resolve an issue. Additionally, the creation of irrevocable trusts and most good-faith transactions, like the sale of a house or car to a third party, cannot be reversed because there is no legal way of doing so. In all other cases, though, it’s possible for several power-holders, or power-holder and power-grantor, to set about reversing each others’ actions.
…their own ability…
The authority of the power-holder can never exceed the ability of the power-grantor…almost. Under a traditional power of attorney, the incapacity of the power grantor automatically stopped the ability of the power holder, and since this almost always defeats the purpose of having a POA, the durable power of attorney was created. With a durable power of attorney, the power-holder can keep doing work on behalf of the grantor even if that person is becomes unable to manage his or her own affairs. Even so, a conservatorship or guardianship will always trump a power of attorney, and the power becomes void on the death of the grantor.
…to the extent specified in the document.
Not all powers of attorney are equal, nor do they provide broad and automatic capabilities. Rather, each power of attorney can be limited in both what can be done, and when. The most common when limitation is called a springing condition. This is a trigger event, specified in the document, that must happen before the power-holder can start to use the power. This could be a specific age, or a doctor’s note attesting that the person needs help. Powers of attorney can also specify that they are only valid in a certain date range, or under other unique circumstances.
Additionally, a power of attorney is only valid for the types of decisions specifically spelled out in the document. The recommended “statutory short-form” in Connecticut provides for broad authority over financial accounts, real estate, personal property, public and employer benefits, purchases and estate planning, as do many long-form documents. However, it is equally possible to have a document with a narrower scope, right down to a single, specific transaction, such as an out-of-state real estate closing. Moreover, a person can create several powers of attorney that convey significantly different responsibilities, with some parts overlapping and others completely separate.
I hope this article has helped to clear up some of the assumptions you may have had about what your power of attorney will or will not do. If you find that you need to take an active role as someone’s attorney in fact (the official title of the “power-holder”), it may be beneficial to speak with an attorney about the rights, responsibilities, and dynamics it creates.