POWERS OF ATTORNEY:
What Are They and Do You Need One
By: Sandra L. Clapp, Esq.
The term “power of attorney” is a general reference to a legal document that delegates power from one individual (the principal) to another person (the agent). The actual authority that is granted in the power of attorney will vary based upon the particular terms of the document itself. A power of attorney may be limited (such as to authorize the agent to execute documents on behalf of the principal to conclude an identified transaction) or general (broad or unlimited powers to act on behalf of the principal). The power of attorney may be for health care or for financial and business purposes. The ability of the agent to use a power of attorney for a particular purpose will be directly related to whether the action is authorized in the power of attorney. The power of attorney will often include a clause to make it “durable,” meaning it will not terminate upon the incapacity of the person granting the power of attorney.
The two most commonly used powers of attorney in Idaho are the durable power of attorney for health care and the durable general power of attorney for property and financial affairs. The Idaho legislature has adopted a standard form for both of these powers of attorney. The Idaho health care power of attorney form was updated effective July 1, 2007, and the new Idaho statutory power of attorney form was adopted effective July 1, 2008. If you have powers of attorney signed prior to these dates they remain valid, but may not be as comprehensive as necessary or appropriate under current law. In addition, your financial institution or brokerage firm may have its own standard form of power of attorney that it will require be executed to authorize the agent to access the account with the institution.
The goal in executing the powers of attorney would be to identify the person(s) who have authority to make medical decisions and to handle financial and business affairs on behalf of the principal in the event of illness or incapacity. The person identified as agent in a power of attorney may also have statutory priority in the event a guardianship or conservatorship proceeding over the principal becomes necessary. It is important to consider naming a succession of agents in the document if the primary agent cannot serve. For a professional or business owner, it may be appropriate for the power of attorney to include particular authority or power based upon the nature of the profession or business.
The risk in delegating such powers (particularly in a general financial or property power of attorney) is the potential for abuse even if capacity of the principal is not in question. In selecting the agents in the power of attorney, it is critical to identify person(s) who are generally diligent, trustworthy, and have the ability or skill to make the decisions being delegated to them. If you authorize the agent to act while still competent and actually enable the agent to assist with the delegated powers, it is strongly recommended that you monitor the conduct and decisions of the agent to minimize potential for misappropriation or abuse. The agent under a general power of attorney will potentially have the ability to expend, transfer, or encumber assets, even if such transactions are not legally appropriate for the principal. There is a difference between the technical authority under a power of attorney to undertake the transaction and the propriety of such transaction for the principal. The power of attorney can include a “springing” clause that limits the ability of the agent to use the power of attorney unless the principal has been determined to be incapacitated or other identified conditions are satisfied.
The power of attorney will automatically terminate upon the death of the principal. Upon death of the principal, all power of the agent under the power of attorney ceases and the estate of the principal must be administered by the personal representative in an estate proceeding.
This article is not intended to replace legal advice applicable to your situation and should be used only for informational purposes. Because of the complexity of the law, please consult with your attorney for proper guidance.