A power of attorney is an authorization to act on your behalf or represent your interests. There are different types of powers of attorney. Typically, a power of attorney is granted to allow someone to handle your financial affairs. They can be specific, for only one specific issue, or general, for all or most of your personal and financial affairs. Another type is a healthcare power of attorney for medical decisions. In all powers of attorney, the person who gives the power of attorney is called the principal or donor, and the person who receives the power is called the agent or donee. The powers can be durable or non-durable. A durable power of attorney will still be effective should you become disabled or incapacitated. A non-durable power of attorney would become ineffective upon your disability or incapacity. Further, a power of attorney can be drafted to become effective immediately or at some point in the future, i.e. upon your disability or incapacity.
Powers of attorney can be used in a variety of situations, including business transactions, confidential relationships (as in where one party will talk only with the principal or his attorney), or conveying real or personal property. A power of attorney essentially allows another person to step into your shoes for the purposes expressed in the document. If your power of attorney is general, the agent will be able to do, on your behalf, almost anything you can do yourself.
An agent can only do what the principal authorizes in the power itself. So, for example, if you authorize your child to sell your personal belongings to fund a trust for your future medical care, your child cannot sell your house. If your child tries to do so, the sale is invalid.
Your agent is also a fiduciary, which means he must act in your best interests. That means he cannot sell your personal property and put it in trust for his child’s college education. While he had authority to sell the personal property, he violated his fiduciary duty by taking the money for himself. If this happens, you can ask the court to hold your child personally liable for his actions.
For a non-durable power of attorney, the power is effective for however you long you specify, and then generally only as long as you have capacity. If you become incapacitated, the power terminates. For a durable power of attorney, on the other hand, continue after you lack capacity—it is durable because it survives your incapacity.
Cleveland estate planning attorney Bart Leonardi can advise you on whether a power of attorney is appropriate for your particular situation and whether choosing your child as the agent is a prudent choice. Mr. Leonardi will work with you to understand your individual needs and tailor a power of attorney that fulfills them. Call today to schedule a consultation.