A power of attorney is a legal concept, but it does not have to involve lawyers in most cases. There are numerous variations of power of attorney (POA), but the basic premise is to appoint someone else to act on your behalf. Typically, individuals may employ a POA for convenience or necessity.
For example, busy investors may want to designate a POA to someone they trust to allow that person to act on their behalf when they can’t be present. Suppose you must be at a property closing in one state while presiding over a board meeting in another state on the same day. You can designate the person with your POA to represent you at the closing while you attend the board meeting. In this case, the POA is most likely acting according to your wishes, not making decisions for you.
In contrast, if you designate someone to act with a POA if you become incapacitated, that person will not have any authority while you can still manage your own affairs. This type of POA is often called springing, and the designation documentation should specify what triggers the authority.
What triggers a springing power of attorney?
In many cases, people use a springing POA to authorize another person to act on their behalf when they are incapacitated. The POA would “spring” into action if the grantor is mentally or physically unable to make or express decisions. Triggers could include a severe illness, cognitive decline, or a sudden concern like an accident.
The POA might include broad authority to assume control of their grantor’s business interests or be limited to specific issues like medical decisions. Medical POA grants, also known as healthcare proxies, are very common. These authority grants are often established to allow an agent to make medical decisions on behalf of someone unable to do so.
A springing POA may also be a durable power that remains in effect until the grantor either regains the capacity to act independently or dies. A durable grant can also be broad enough to include your business interests or be limited to healthcare matters.
How do I designate a POA grant?
While a POA does not require an attorney in most cases, it almost always needs to be a notarized declaration. Every state has downloadable forms available for individuals seeking to establish this protection. You can start by checking with your local bar association group for direction or the Secretary of State's office where you reside.
The Uniform Law Commission also developed a simple form that people can use for most purposes. Almost every state accepts this form for basic POA designations. If you plan to create a healthcare proxy, talk to the hospital where you receive care. Some states require that healthcare proxies be accompanied by detailed “living will” information, but this requirement is not as widespread as it was previously.
How can I revoke a POA?
If you have granted a durable POA that springs into effect due to medical changes impacting your ability to care for yourself, it can be challenging to revoke the designation. You may need to demonstrate that you are capable. Your POA designee or other associates or relatives may dispute your capacity, which can lead to legal conflict. However, since you determine the individual who will act as your POA, you can try to avoid potential issues by choosing carefully and ensuring that the designee supports your interests.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
