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Tuesday, December 8, 2009

The Basics of Powers of Attorney

A power of attorney is a document used by someone (a "principal") to appoint an agent to act on their behalf. Generally there are two different types of powers of attorney: property and health care. This post will discuss powers of attorney for property.
The principal authorizes the agent to perform certain tasks regarding the finances of the principal. The power of attorney may be as broad or as narrow as the principal desires.
A power of attorney is only effective during the lifetime of the principal. It is ineffective when the principal dies.
An agent has a fiduciary duty to the principal and must handle the assets subject to the power of attorney solely for the benefit of the principal. Self-dealing is not allowed and is a breach of the duty owed to the principal.
If provided for in the power of attorney document, the agent may be compensated for their time.
Powers of attorney may be effective upon signing or triggered at the occurrence of a condition, like the determination of in the incapacity of the principal.
As long as the principal is competent, powers of attorney may be amended or revoked.
Many financial institutions insist that a power of attorney for property not be too old (or "stale"), as they are more comfortable that a more recent power of attorney is less likely to have been revoked by the principal.
Bottom line: Make sure you have an updated power of attorney for property.

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