Power of Attorney:
Who Needs One and Why?
A power of attorney is a legal document that authorizes someone else to act on your behalf, as your agent.
It can be limited and only give power in a specific area and/or account. For example, if you work with a professional investment manager who handles your assets, you have likely signed a power of attorney to allow them to make trades in your account on your behalf. Alternately, they can be very broad and confer a large number of powers.
The power of attorney (POA) can take effect immediately (as soon as you execute the document and either have it acknowledged by two witnesses or have it notarized) or you can have it “spring” into effect on a specific event, such as when two doctors say you are incapacitated. You can also have a general power of attorney, which automatically ends if you are incapacitated, or a durable power of attorney which continues if you are incapacitated. (Note that both types of POAs automatically end upon death).
why would I need a power of attorney?
Hopefully, you never encounter a situation where you are incapacitated and need someone to step in to manage your affairs. However, accidents are common and many people experience at least a temporary incapacity at some point in their life.
If you are in a car accident and land in the hospital for a few weeks, who can access your accounts to pay bills? After all, once you are out of the hospital, you want to return with your home, car, and utilities all intact and without facing late fees on top of your medical bills.
If you expect your spouse to be able to step in, that only works if they are joint owners of the account(s). Otherwise you need a POA naming your spouse so they can access accounts in your name.
Can i use the statutory power of attorney form?
Yes. California has a statutory form expressly authorized by the Probate Code which you can use on your own. The form identifies 13 different categories of powers you can give to your designated agent and you can choose any or all of those categories. The specific scope of those powers are governed by statute.
- CA Probate Code Section 4450 outlines the overall powers that come with every category (such as the ability to enter into a contract).
- CA Probate Code Sections 4451-4463 outline the scope of the powers for each category (such as the power to sell a property if you select the real property transactions category).
If you want to limit the powers or modify them so it does not follow the statute exactly, you have to expressly do so on the form in the special instructions category.
is there a benefit to using a long-form or lawyer drafted power of attorney?
Yes. When your agent presents the power of attorney (POA) to an institution so they will give your agent access consistent with their authority, the institution wants to see that the specific task(s) the agent is trying to take are within the scope of the POA. It is much easier to get the institution to honor the POA if your agent can easily point to the exact section and language that authorize the task in the document.
Also, a lawyer can help ensure your POA is set up property for the circumstance(s) it may be needed as well as step in and assist you if the organization/institution is refusing to honor a proper POA. Otherwise there’s a higher risk of getting the run-around or simply being told the POA will not be accepted.
In addition, if you do not want to use the exact statutory authority and want to modify the scope of the powers (either by adding or subtracting powers), it will be harder for people to interpret the commentary below and reconcile with the statutory language. Whereas if you clearly state the scope of the powers in a long-form document, you avoid any confusion or incorrect interpretations from attempts to reconcile the special instructions with the statutory language.
You can write your own and reference or use statutory language to do so. Alternately you can work with a lawyer who can help ensure your wishes are conveyed in a manner that will be interpreted properly. A lawyer can also help identify areas that may be of particular concern given your situation and/or identify the pros and cons of different approaches.
What should I consider including in the power of attorney?
There are a number of different categories of powers you may want to consider including in the power of attorney (POA), whether you modify the statutory form, draft one yourself, or work with a lawyer. These can include:
- real and personal property;
- motor vehicles;
- stock and bond transactions;
- financial institutions;
- safe deposit boxes;
- insurance and annuities;
- beneficial interests;
- electronic communications and digital assets;
- retirement plans and benefits;
- college savings plans;
- claims and litigation;
- tax matters;
- personal and family maintenance;
- governmental benefits;
- fiduciary positions;
- medical planning;
- create a trust;
- transfer assets to trust;
- spousal consent;
- incidental powers.
You also want to think about whether you want to give your agent the power to reimburse themselves for expenses incurred on your behalf. Further, you may want to consider compensation for their services.
In addition, you may want to consider some nuances you can incorporate into the POA. For example, you could have the POA take effect immediately if your spouse becomes your agent and make it a springing power if someone else becomes your agent. You can also decide to give certain powers only if your spouse is acting as agent. For example, you may want to allow your spouse to give monetary gifts on your behalf out of your accounts but not want any subsequent agents to give gifts.
If you are concerned about the agent potentially abusing their powers, there is legal protection for you. When someone acts as your agent under the POA, they are bound by legal responsibilities to work in your interest and to avoid conflict or self-dealing. However, you should still be sure to select someone you trust as it is a very important role and you never want to be in the position of yourself (or someone else on your behalf) having to sue and/or report your agent for violation of their duties.
Where should i keep the power of attorney?
This may sound obvious, but you need to keep your power of attorney (POA) somewhere your agents can access it. As a result, typically you do not want to keep it in a safety deposit box because they won’t be able to get access to the box without the POA.
I generally recommend keeping the POA in a fire proof safe in your residence along with any other estate planning documents. Then simply make sure your agents, trustees, and executors know where they need to look in event of your incapacity or death.
Anyone who wants to protect themselves and their assets in the event of an unexpected emergency should have a power of attorney.