This is the first of three blogs (today, tomorrow and Wednesday) in which I will discuss the ‘power’ of this important document. I hope you find it helpful.
Unfortunately, many powers of attorney that I am asked to review are general in nature and can actually cause more problems than they solve, especially given the ever increasing complexity of our financial assets and the maze through which our financial institutions require us to navigate.
The person appointed to serve under a power of attorney has traditionally been called an "attorney-in-fact" although a recent change in Virginia law permits us to refer to them as “Agent”. I personally prefer the more specific term “Attorney-in-Fact” as is unique to this document and will more likely avoid confusion that might arise with the term “Agent” which has a much wider application.
The "law of agency" governs the actions of an attorney-in-fact under a power of attorney. The law of agency is the body of statutes and common law court decisions built up over centuries that dictate how and to what degree an attorney-in-fact is authorized to act on behalf of the "principal"–the individual who has appointed the attorney-in-fact to represent him or her. Powers of attorney are a species of agency-creating document. In most states, powers of attorney can be and most often are unilateral contracts–that is, signed only by the principal, but accepted by the attorney-in-fact by the act of performance.
Much has been written about financial exploitation of individuals, particularly seniors and other vulnerable people, by people who take advantage of them through undue influence, hidden transactions, identity theft, and the like. A prior blog (see blog posts on June 14th and 15th) on guardianships and conservatorships discussed the benefits of court supervision of care of vulnerable people in such contexts. Even though exploitation risks exist, there are great benefits to one individual (the principal) privately empowering another person (the attorney-in-fact) to act on the principal's behalf to perform certain financial functions.
A comprehensive power of attorney may include a grant of power for the attorney-in-fact to represent and advocate for the principal in regard to health care decisions. Such health care powers are more commonly addressed in a separate "health care power of attorney” which is my preference.
Another important preliminary consideration about powers of attorney is "durability." Powers of attorney are voluntary delegations of authority by the principal to the attorney-in-fact. The principal has not given up his or her own power to do these same functions but has granted legal authority to the attorney-in-fact to perform various tasks on the principal's behalf. All states have adopted a "durability" statute that allows principals to include in their powers of attorney a simple declaration that no power granted by the principal in this document will become invalid upon the subsequent mental incapacity of the principal. The result is a "durable power of attorney"–a document that continues to be valid until a stated termination date or event occurs, or the principal dies.
Tomorrow's blog is Part II in this series.