What is a Power of Attorney?
A power of attorney is a power granted by a principal to an agent to perform acts on behalf of the principal. This power does not have to be in writing to be valid, except when it deals with real estate (and when it must be recorded at the Registry of Deeds) but for all practical purposes a power of attorney must be in writing to be effective.
The "Durable" Power
Under the "common law", the law before we had statutes on the matter, the agent could only exercise powers that his principal could exercise. If the principal became ill and could not act in a particular matter, his agent could not act either, so the power of attorney was not effective when it was most needed.
By statute, if a power of attorney states that it will remain effective notwithstanding the disability of the principal, it is a "durable" power of attorney. Virtually all powers of attorney signed today are durable powers.
When is the Power Effective?
A "springing" power of attorney provides that it is effective when the principal becomes unable to act. Springing powers of attorney are seldom used, because it can be difficult for the person to whom the power of attorney is presented to determine that the circumstance necessary for its effectiveness has occurred and that it has "sprung."
Unless a power of attorney contains "springing" provisions, it is effective when it is signed.
How Long Does the Durable Power Last?
The durable power of attorney lasts until the death of the principal or until the principal revokes the power.
In spite of statutes in many states which specify that durable powers of attorney do not expire by reason of time, many financial institutions are hesitant to accept durable powers of attorney which are more than three or four years old. Because of this, we prefer that clients re-execute durable powers of attorney every three years.
What May the Agent Do on Behalf of the Principal?
The agent may do whatever he is authorized to do under the power of attorney. The power of attorney may specify that the agent may perform only certain acts, such as attending a closing and signing documents having to do with the sale of real estate. Powers of attorney are often drawn to enable an agent to act in a particular transaction, and during a particular period of time only.
There are certain acts, such as voting and making a will, that are personal to the principal and which may not be delegated. Other than these acts, the powers which may be exercised by the agent are virtually unlimited.
What About Giving Away the Principal's Assets?
The agent must act in the best interests of the principal. Giving away the principals assets is not generally in the best interests of the principal, except in those cases in which the agent is given the authority to give away the principals property for estate or Medicaid planning purposes.
Except where it is specifically provided, the agent may not make gifts to himself.
What Rules Apply to the Agent?
The agent must act in the best interests of the principal. Where there is a possible conflict between the best interests of the principal and the best interests of the agent, the best interests of the principal must take precedence.
The agent is a fiduciary. A "fiduciary" is "somebody who is entrusted with the management of property or with the power to act on behalf of and for the benefit of another." "Trust" is key. The fiduciary should not commingle the principals assets with his assets. He should keep a record of transactions on behalf of the principal. The fiduciary should act as nearly as possible in the same way that the principal would act under the circumstances if he or she were able to act.
Can a Power of Attorney be Amended if the Principal is Not Competent?
Sometimes we find that the authority granted in the durable power of attorney is not sufficient to enable the agent to do what needs to be done, and the principal is not competent, and cannot sign an amendment or a new durable power of attorney. In that case, we may file a petition in the Probate and Family Court for a limited guardianship and ask the judge to amend the durable power of attorney to add the needed authority.
Should There Be Co-agents Under the Durable Power?
It is possible to designate two agents to act at the same time under a durable power of attorney, but this is not recommended. It is difficult to arrange for two people to be available at the same time and at the same place, and if they do not agree as to action to be taken, this presents significant problems. It is, of course, desirable to appoint a successor to the agent, if the first-named agent is not available.
If agents are needed to perform several different areas of responsibility, it is possible to designate two agents, and limit the power of each to the area of his or her expertise. For example, one agent might be appointed to handle real estate matters, and another agent to handle investment matters.
Is A Durable Power of Attorney Signed Here Good in Other States?
Generally a durable power of attorney signed in Massachusetts is recognized in other states. However, if you plan to use the durable power of attorney to transfer real estate in another state, such as Florida, let us know and we will add the special provisions required for Florida real estate.
Is a Durable Power of Attorney Better Than a Guardianship?
Guardianships are invasive and expensive. Very often a guardianship would not have been needed if a person who becomes disabled had executed a durable power of attorney.
