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A power of attorney is a written document in which one person (the principal) appoints another person (the agent) to act on his or her behalf, thus conferring authority on this third party to perform certain acts or functions on behalf of the principal. Powers of attorney can be general (full power) or specific (limited) in nature. Examples for which a power of attorney might be granted would be to allow the agent to take care of a variety of transactions for the principal, such as executing a stock power, handling a tax audit, or maintaining a safe-deposit box. A power of attorney generally is terminated when the principal dies or becomes incompetent, but the principal can revoke the power of attorney at any time. However, if you grant a power of attorney to anyone, including a friend or relative, and you want to revoke it because you feel that you can no longer trust that individual, you can communicate the revocation to the person that has the power of attorney. However, the larger and more important question is how do you prevent an unscrupulous individual from continuing to use the same, without your knowledge, in dealings with unsuspecting third parties.
A special type of power of attorney that is used frequently is the “durable” power of attorney. A durable power of attorney differs from a traditional power of attorney in that it continues the agency relationship beyond the incapacity of the principal. The two types of durable power of attorney are immediate and “springing.” The first type takes effect as soon as the durable power of attorney is executed. The second is intended to “spring” into effect when a specific event occurs, such as the disability of the principal. Most often, durable powers of attorney are created to deal with decisions involving either property management or health care.
In the course of our practice, we see frequent abuses associated with the granting of powers of attorneys to family members and business relationships. In the former, consider the following scenario. An elder individual has three children. A power of attorney is granted to only one of the children who decides that because he or she has to take primary care of the elder person whom he or she is entitled to immediately or over time transfer to himself or herself all of the elder persons assets, in effect “cutting out” all of the other family members or by not leaving enough assets in the elder person’s name to take care of that person. In the latter circumstance, an example of abuse would be the granting of a limited power of attorney to a stockbroker or investment advisor who churns the elder person’s account and can do so without the need to contact the elder person.
Please keep in mind that this information is being provided for educational purposes only. It is not complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If after reading this post, the reader has any questions, you should contact a qualified professional.Contact Us
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