What is Power of Attorney?
Power of Attorney allows one person to give permission to another person or entity to act upon their behalf in matters related to finances and business and medical decisions among others.
The person who creates the Power of Attorney is given the title of principal. A Power of Attorney is usually terminated when the principal dies or becomes incompetent. However, the Power of Attorney can be revoked at any time at the discretion of the principal.
The person or entity that is given the permission to act on the principal's behalf is called the agent. Once permission to act is given by the principal, the agent has the power to bind the principal by contract or create liability if they cause an injury to another person or entity while carrying out their agent duties. The law in Pennsylvania assigns general duties to the designated agent. Those duties include; acting loyally for the principal's benefit; keeping their funds separate from the principal's; acting with care, competence and diligence; keeping records; cooperating with a person who has authority to make health care decisions for the principal; and attempting to preserve the principal's estate plan. However, these duties may be modified or waived within the Power of Attorney if the principal so chooses.
What is included in a Power of Attorney?
There are different types of Power of Attorney and it is important that you choose the one that best fits your needs. The different types of Power of Attorneys include:
- Limited
- General
- Durable
- Springing
A Limited Power of Attorney allows the principal to define their responsibilities within a very narrow scope. This gives the principal an incredible amount of control. For example, a limited power of attorney could be used to allow someone to have the right to write a check drawn on one of your bank accounts on a specific day while you are out of town.
A General Power of Attorney is more comprehensive than its limited counterpart and gives the designated agent all of the powers and rights that that the principal has. For example, under a General Power of Attorney, an agent may be allowed to run all of the principal's financial and business obligations.
A Durable Power of Attorney can be limited or general but it remains in effect after the principal becomes incapacitated. A Durable Power of Attorney thus allows the principal to be represented in the event that they become incapacitated and the document remains in effect until either the principal passes away or the principal's health condition improves and they voluntarily rescind the Power of Attorney.
A Springing Power of Attorney only becomes effective upon certain conditions being met. For example, a Springing Power of Attorney is often used in a military situation where military personnel will be deployed overseas. Under this example, the Springing Power of Attorney would not spring into being effective until the military personnel's deployment takes place. Another example would be if the principal decides that they only want the Power of Attorney to become effective if and once they become incapacitated. If this were the case, the principal would remain fully in control of their affairs until the moment they become incapacitated.
Who Needs Power of Attorney?
People create a Power of Attorney document for many different reasons. Those reasons include, but are not limited to:
- The principal is too overwhelmed to handle all of their financial affairs
- Members of the military may utilize a Power of Attorney so that their USA located family can act on their behalf
- People with deteriorating health may create a Power of Attorney so that trusted individuals may act on their behalf should they become incapacitated
How is Power of Attorney Created?
To be valid in Pennsylvania, a Power of Attorney document must be signed before two witnesses as well as a notary by the principal. In addition to the principal's signature, the agent must sign a document acknowledging that they know of the responsibilities that come with being an agent and agree to carry out their duties as called upon. Those duties include:
- Acting in accordance with the principal's reasonable expectations to the extent actually known by the agent, and otherwise in the principal's best interest
- Acting in good faith
- Acting only within the scope of authority granted in the Power of Attorney
How does Power of Attorney work in Pennsylvania?
Pennsylvania lawmakers, in an effort to prevent the misuse of Powers of Attorney, tightened laws in 2014 that restricted the ability for individuals to sign powers on behalf of a principal and required witnesses to observe the signing of the document along with a notary.
Most Powers of Attorney begin to take effect when the Power of Attorney document is signed. However, if the Power of Attorney is a Springing Power of Attorney, it will take effect once the action called for within the document takes place.
All Powers of Attorney automatically end upon the principal's death or upon the revocation by the principal.
When the testator passes away, the estate that was established within the Will undergoes probate. Probate is the legal process that proves the established Will is valid and should be executed according to its terms.
If you or a loved one is considering creating a power of attorney, contact our Family Law Team at LLF Law Firm today.
