A power of attorney is a document used to appoint a person to act as an agent.
An agent is a person who has the legal authority to act for another person.
The person who appoints the agent is called the “PRINCIPAL.”
The agent is called the “ATTORNEY-IN-FACT.”
Powers of attorney are believed to have originated in England during the time of the Crusades. Because a knight would be away from his home and property for long periods with little or no communication with those who remained behind, it became necessary for him to designate someone who would have the power to act for him with respect to his property during his absence. As communication and travel became easier and faster, the primary purpose of powers of attorney changed to providing a mechanism for dealing with and managing a person’s property if and when he was not able to do so himself because of physical or mental disability. The problem, however, is that according to the English common law a power of attorney is automatically terminated or revoked when the person granting the power becomes disabled.
Recognizing that most persons who grant powers of attorney do so anticipating that the power will be effective upon their disability, most states within the past ten or so years have made statutory provision for “durable” powers of attorney. In Arizona a durable power of attorney should provide that “this power of attorney shall not be affected by the disability of the principal” or “this power of attorney shall become effective only upon the disability of the principal.” Of these two forms, the second is sometimes known as a “springing” power. The power of attorney should be drafted to provide some objective standard of disability, such as proper certification by an adult child and the family physician.
Powers of attorney, whether durable or not, can be either “general” or “special.” With a general power of attorney, the owner of property, called the principal, grants to someone else, called the attorney-in-fact, complete legal power to act for the principal with respect to his property. Such a power would empower the attorney-in-fact to collect funds, cash checks, draw on bank accounts, manage and sell real property, sell securities and reinvest, pay bills, and generally expend funds for the benefit of the principal. The obvious danger is that the attorney-in-fact can wrongfully use the power for his own benefit. It is important, therefore, to give a general power of attorney only to a completely trustworthy person, or, perhaps, to give a joint power to two persons so that one can check on the other.
A special, or limited, power of attorney is less dangerous because it gives the attorney-in-fact the power only to deal with assets in a restricted way or only to deal with certain assets. For example, the power of attorney might give the attorney-in-fact the power to write checks only on a specified bank account, the power to sell only a specified stock or piece of real property, or the power only to transfer assets to a trust created by the principal. Banks and many stock brokers have their own forms of limited powers of attorney for use at such bank and brokerage house; so, if the power is to be limited to dealings at a specific bank or stock broker, it is probably easier to use their procedures.
Establishing joint tenancies usually gives either joint tenant the power to deal with the property, so a power of attorney may not be necessary if one of the joint tenants becomes disabled. If, however, the property is real estate, each joint tenant must sign, and costly delays in dealing with such property may result if one joint tenant becomes disabled. If a person becomes disabled without providing some mechanism for someone else to manage and deal with his property, such as a living trust or a power of attorney, a conservator must be appointed by the court, which involves a not inexpensive legal determination that the person is incompetent. The conservator must post a bond, again not inexpensive, and account annually to the court. Trustees and attorneys-in-fact are not required to post a bond or report to any court.
Formerly powers of attorney applied only to property. Recent changes in the law now make it possible to legally empower another to make decisions regarding his/her person. For example, a person can now give someone else the power to consent to his/her medical treatment. Most hospitals and health care providers recognize “medical powers of attorney” which give someone else the power to give or refuse consent to medical treatment.
Arizona law changed a few years ago to require that certain powers of attorney be witnessed. An acknowledgement is sometimes necessary. Also, certain provisions in certain powers of attorney must be witnessed. Many old forms still abound, leaving those who do-it-themselves at great risk. Use a pre-printed form with great caution and only if you are willing to accept the risk that the form may not be valid or effective.
As a result of the Health Insurance Portability and Accountability Act, many health care providers are no longer recognizing powers of attorney that do not contain a specific reference to HIPAA, or do not contain specific HIPAA language. Thus, many older powers of attorney may no longer be useful. Powers of attorney that were prepared before HIPAA should be reviewed to determine if they are still effective.
The agent appointed by power of attorney may be any adult, and is often a close relative, lawyer or other trusted individual. The person appointed does not have to be a resident of the state of Arizona.
A provision in a power of attorney which causes the power of attorney to remain valid even when the principal becomes incapacitated makes the power of attorney “durable.”
Many people are unaware that an ordinary power of attorney is revoked, and the agent’s power to act for the principal automatically stops, if the principal becomes incapacitated.
Under Arizona law, a power of attorney which contains the proper language may be made “durable.” This means that the power of the agent to act on the principal’s behalf continues even if the principal becomes legally incapacitated.
It is possible to create a durable power of attorney which will only become effective when the principal is incapacitated or when some other specified event or condition occurs. This is ordinarily called a “springing” durable power of attorney.
Under many circumstances, the death of the principal revokes a durable power of attorney. In addition, a durable power of attorney may be revoked by the principal at any time, either orally or in writing. It is strongly recommended that the revocation be written and be communicated to those to whom the power of attorney was communicated.
Caution About Powers of Attorney
Durable powers of attorney, and especially springing durable powers of attorney, need to be very carefully prepared. You should seek the advice and assistance of a competent attorney who practices in this area. In addition, you should use great care in the selection of your attorney-in-fact. Remember, you are trusting not only your property, but perhaps your life, to the person you nominate and appoint.
In Arizona, any authority granted in a power of attorney the use of which is not in the best interest of the principal must be specifically identified in detail within the instrument and must be separately initialed by the principal and by the witness at the time of execution.
Some Powers May Not Be Granted By a Power of Attorney
Under Arizona law, a power of attorney may not grant the right to do certain things. For more information about what a power of attorney may not do, seek the advice of competent counsel.
For assistance with an Arizona power of attorney, contact us.