Who has the Power?

power-of-attorney--300x200News outlets have recently reported that Senator Dianne Feinstein has given a power of attorney to her daughter.  Concerns over the Senator’s mental competency have arisen as a result.  For the reasons discussed in this post, appointing an agent by power of attorney does not necessarily mean that one is incompetent to handle one’s legal and financial affairs.

In New York State, there are various types of powers of attorney, governed by a provision of the General Obligations Law.  In all cases, the person making the power of attorney is the principal who appoints a person or persons to act on one’s behalf, an agent.  The standard form of power of attorney appoints one or two agents, who may or may not be required to act together.  Up to any of fifteen legal actions can be authorized or all fifteen actions can be authorized.  Some examples of the actions that could be authorized include real estate transactions, banking, insurance and tax matters.  The document needs to be initialed and signed by the principal, as well as notarized and witnessed by two persons.  The agent cannot be a notary or witness to the document, but the agent needs to sign a portion of the document before a notary accepting the role as agent.  This type of power of attorney is effective immediately and is not dependent upon whether a person is competent.

The standard power of attorney can also limit the agent to acting with respect to a specific matter.  For instance, if the principal will not be attending her house closing, she can appoint her attorney for the limited purpose of all matters required to complete a specific transaction.  In this case, only some of the fifteen potential actions will be authorized.  This limitation protects both the principal and the agent, since the agent cannot conduct actions beyond those required for the closing.  The agent appointed could be a spouse or other relative, a friend or one’s attorney.  Depending upon the closeness of the relationship and the degree of trust, the principal will decide whether the authority should be immediate or limited in any way.

Another type of power of attorney is known as the springing type, because it becomes effective at a future time.  A springing power of attorney is effective upon the certification by a medical professional who has treated the principal within the past year that the principal suffers from diminished capacity and is not competent to handle her affairs.  A springing power of attorney is to be initialed, signed, notarized, witnessed in a similar matter to the standard form.  Likewise, the agents need to accept their authority.  One important difference is that the springing type includes an authorization to obtain medical records, which may be required to demonstrate that the events required for the power to be effective have occurred.

Powers of attorney should not be treated as a singular stand-alone document.  Either type of power of attorney can be part of a comprehensive estate planning document collection prepared by an experienced attorney.  At the appropriate time, a power of attorney can be relied upon to transfer assets, pay necessary medical and household expenses and the like.

Principals can revoke the power of attorney in accordance with the General Obligations Law.  When the document is used, the agent signs an affidavit of full force, certifying that the document has not been revoked by the principal.

Powers of attorney are no longer effective once the principal is deceased.  Fiduciaries, such as administrators and executors of estates, cannot grant a power of attorney to an agent.  Likewise, an entity such as a corporation or limited liability company cannot grant signing authority to a person by power of attorney.

It should be noted that from time to time, the statutes governing powers of attorney are amended to correct perceived abuses of the authority granted, fraud, and acceptance of the documents by third parties.  Qualified attorneys will be certain that the current version of the document is signed.  However, powers of attorney signed before the effective date of an amended statute will remain effective.

We consult with our clients on a regular basis as to the appropriate power of attorney that may be needed and remain available for your inquiries.

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