Power of Attorney

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Types of powers of attorney

A Power of Attorney is a legal instrument that is used to delegate legal authority to an Attorney-in-Fact. You can delegate authority to do anything you yourself have the legal authority to do. The authority to make health care decisions must be made by a health care proxy. Authority over financial type matters is given via a Power of Attorney. You are the Principal and you are giving this Power of Attorney to your Agent or Attorney-in-Fact. Subject to the express written restrictions contained in the Power of Attorney, it gives him or her full legal authority (without prior notice to you) to make property, financial and other legal decisions on your behalf.

You can give an Agent broad legal authority, or very limited authority. A Power of Attorney is frequently used to help in the event of a Principal's illness or disability, or in legal transactions where the principal cannot be present to sign necessary legal documents. This can be useful for snow-birders, frequent travelers or home-bound persons.

As a reminder, you may revoke a Power of Attorney at any time or for any reason. The Agent named in a Power of Attorney is your representative, not your "boss." As long as you have the legal capacity to make decisions, you can direct your Agent to do only those things that you want done. The Attorney-in-fact has a fiduciary responsibility to act in your best interests (However, cases of abuse are not unheard of).

There are "Nondurable ," "Durable," and "Springing" Power of Attorney. A "Nondurable" Power of Attorney takes effect immediately and remains in effect until the Principal becomes mentally incompetent, dies or revokes the Power of Attorney.

A "Nondurable" Power of Attorney is often used for a specific transaction, like the closing on the sale of residence, or the handling of the Principal's financial affairs while the Principal is traveling outside of the country.

A "Durable" Power of Attorney enables the Agent to act for the Principal even after the Principal is not mentally competent or physically unable to make decisions. The "Durable" Power of Attorney may be used immediately, and is effective until the Principal's death or it is revoked. It is important to understand that the powers delegated cease at death (That makes sense if you reflect on it, you cannot delegate things you cannot do yourself and you cannot do much after death). An executor or administrator must then handle things.

A "Springing" Power of Attorney becomes effective at a future time. That is, it "springs up" upon the happenings of a specific event chosen by the Power of Attorney (e.g., the illness or disability of the Principal).

The "Springing" Power of Attorney may provide that the Principal's physician will determine whether the Principal is competent to handle his or her financial affairs. A "Springing" Power of Attorney remains in effect until the Principal's death, or until revoked by a court. It may be revoked prior to the time it becomes effective. Oftentimes, once effective, a court must revoke it.

"Durable" and "Springing" Powers of Attorney are frequently used to plan for a Principal's future incapacity or disability and loss of competence resulting, for example, from Alzheimer's Disease, terminal illness or a catastrophic accident. This develops a plan and procedure for the management of his or her financial affairs in the event of incompetence or disability. This avoids the expense of having a court appoint a Guardian to handle the Principal's affairs in the event of incompetence or disability.

Am I required to file a Power of Attorney in a government office?

Not unless the Power of Attorney is used in a real estate or other transaction. In that case, it must be filed in the County Clerk's office where the deed will be recorded. When you file in the County Clerk's office, the Power of Attorney is a public record open to inspection by the public. A writing that revokes a filed Power of Attorney should also be filed in the County Clerk's office.

If you file a Power of Attorney in the County Clerk's office, you will be able to get additional "certified" copies from the County Clerk for a small fee. A certified copy is legally equivalent to the original document. It is often convenient to have certified copies of your Power of Attorney on hand.

What are an Agent's obligations to a Principal?

The Agent is obligated to act as a fiduciary in the best interests of the Principal, and to avoid any "self-dealing." Self-dealing is acting to further the selfish interests of the Agent, rather than the best interest of the Principal. The problem is often that these acts fo undetected until it is too late.

An Agent appointed in a Power of Attorney is a fiduciary, with strict standards of honesty, loyalty and candor to the Principal. An Agent must safeguard the Principal's property, and keep it separate from the Agent's personal property. Money should be kept in a separate bank account for the benefit of the Principal. Agents must also keep accurate financial records of their activities, and provide complete and periodic accountings for all money and property coming into their possession.

We recommend that you make clear to your Agent that you want accurate records of all transactions completed for you, and to give you periodic accountings. You can also direct your Agent to provide an accounting to a third party (a member of your family or trusted friend, lawyer or accountant) in the event you are unable to review the accounting yourself.

Is it possible for an Agent to steal my money and property?

Yes! A Power of Attorney can be abused. There are dishonest Agents who have used Powers of Attorney to transfer the Principal's assets to themselves and others in disregard of their fiduciary duties. That is why it is so important to appoint an Agent who is completely trustworthy. It is advisable to require the Agent to provide complete and periodic accountings to you or a trusted third party (your children, lawyer, accountant, etc.).

Can a transfer of a Principal's assets to other people be a good thing?

Yes! A Principal may want to authorize transfers or gifts property for estate planning and other valid purposes. New statutory short-form Powers of Attorney in New York State permit Agents to make gifts to members of the Principal's family, if the Principal so authorizes in the Power of Attorney. The Principal can also customize a Power of Attorney to permit the Agent to make gifts to non-family members.

Who monitors the actions of my Agent?

The State Attorney General advises that: " There is no official or government monitoring of Agents acting pursuant to Power of Attorney. That is the responsibility of the Principal. It is therefore important to insist that your Agent keep accurate records of all transactions completed for you, and to provide you with periodic accountings. You might also direct your Agent to give an accounting to a third party in the event you are unable to review the accounting yourself.

Should a Principal, member of the Principal's family or a friend have grounds to believe that an Agent is misusing a Power of Attorney, the suspected abuse should be reported to the police or other law enforcement authority to protect the Principal from the loss of his or her property. Consider asking a lawyer for help and advice."

What can I do if my Agent does not follow my instructions?

You may revoke your Power of Attorney at any time. You should inform your Agent, in writing, that you are revoking the Power of Attorney. Request the return of all copies of your Power of Attorney.

You should notify your bank or other financial institution where your Agent has used the Power of Attorney that it has been revoked.

You should file a copy of the revocation with the County Clerk if your Power of Attorney has been filed in the Clerk's office.