A power of attorney (“POA”) is a document in which the person creating the POA (the “Principal”) grants authority to another person (the “Agent” also called an “attorney-in-fact”) to act on behalf of the Principal. The authority granted to the agent can become effective immediately or at such later time as the Principal designates such as when he or she is not able to act for himself or herself due to physical or mental incapacity. There are two kinds of power of attorney prepared as part of your estate plan – the General Durable Power of Attorney (“GD POA”), in which the Principal appoints an agent to manage his or her business matters and a Health Care Power of Attorney (“HC POA”), which in the Principal appoints an agent to make the Principal’s health care decisions.
General Durable Power of Attorney.
The GD POA grants authority to an Agent to manage business matters on behalf of the Principal. It is called “durable” because normally a POA terminates when the Principal becomes mentally incompetent. However, if the POA is made durable, the agent’s authority will endure beyond the Principal’s incompetence until the Principal’s death. At the Principal’s death, powers of attorney are terminated and the after-death affairs are managed by the executor named in the decedent’s will.
If a person becomes disabled and does not have a durable power of attorney, the only way to obtain the authority to represent that person (even if you are married) is by filing a lawsuit for the purpose of being appointed as guardian of the person and/or the person’s estate. This process is time consuming, expensive and requires on-going accounting to the court by the guardian and can be entirely avoided by having a durable power of attorney.
The GD POA can be made effective immediately or only upon the principal becoming disabled (mentally or physically). This is your decision to make – whether the GD POA should become effective immediately or upon disability. In making this very important decision, there are two offsetting considerations. If you make the GD POA effective immediately, then your attorney-in-fact can thereafter perform the transactions you give them authority to perform in the GD POA, which is almost any transaction. Thus you must trust your agent. If you make the power effective immediately, you can file the GD POA with the Register of Deeds immediately or only if the Principal becomes disabled, and this will allow the agent to transact all business on the Principal’s behalf, including selling real estate. However, if you make the GD POA effective upon disability, you can have the issue of whether the Principal is in fact disabled and this issue can be litigated in court. If there is any dispute about the Principal’s disability, then the agent may not be able to act for the principal until the dispute is resolved by court action.
Health Care Power of Attorney.
The HC POA gives authority to an agent to make health care decisions for the principal if he or she cannot make them. The HC POA can only become effective at the time the Principal can no longer make decisions for himself or herself. The Agent will make medical decisions considering the wishes you have expressed to them directly and in a document called a Declaration of a Desire for a Natural Death, which is discussed below. Thus, the two documents work in tandem in making medical decisions for the principal.
A power of attorney can appoint more than one person to act as the principal’s agent. However, a joint agency appointment can result in conflicts between the agents and it can also be cumbersome for two agents to agree on each and every decision and it can be burdensome for them to both have to sing each and every document requiring joint agreement. Joint agents can also have the authority to act jointly or individually, which is often a good solution if the principal wants more than one agent to be empowered to act at the same time.
Declaration of a Desire For a Natural Death (commonly known as “Living Will”).
This document is a declaration by a person of his or her desire of what will be done on his or her behalf by the health care agent under the Health Care Power of Attorney – in the event of three circumstances:
- You have an incurable or irreversible condition that will result in my death within a relatively short period of time;
- You become unconscious and my health care providers determine that, to a high degree of medical certainty, I will never regain my consciousness; or
- You suffer from advanced dementia or any other condition which results in the substantial loss of my cognitive ability and my health care providers determine that, to a high degree of medical certainty, this loss is not reversible.
You will have to state whether you want medical care, including hydration and nutrition, to be given to you or to be withheld. It can also grant permission that your organs be donated.
The declaration is used in conjunction with the HC POA to give both legal authority and to make a statement of your desires about health care treatment when you can no longer speak for yourself.