A power of attorney is a legal document delegating authority from one person to another. The principal is commonly referred to as the individual executing a power of attorney. The power of attorney is a document wherein the principal names an attorney-in-fact or an agent. Do not confuse attorney-in-fact with the individual’s attorney-at-law. The attorney-at-law is the individual drafting the document and the attorney-in-fact or agent will be the person named to serve in this document for the benefit of the principal. The principal gives the attorney-in-fact or agent the authority to act on his or her behalf regarding the financial affairs of the principal. The scope of the power of attorney can be as broad or as limited as the principal would desire. The power of attorney gives the agent the ability or control to bind the principal to third parties.
The principal does not have to be incapacitated for the attorney-in-fact to use the document. The idea that the principal does not have to be incapacitated for the document to become effective is alarming to some individuals. This fact alone causes great reserve to individuals who are contemplating their own needs. It is difficult to give up the authority when you are not ready or do not need assistance. However, if you do not execute a durable power of attorney, the alternative in the event one is needed and not executed, is a guardianship. Guardianship proceeds are expensive, and intrusive and cause a delay in receiving the help that is needed.
Variations to a Power of Attorney
There are several variations to a power of attorney. Some of those variations are a limited power of attorney, a general power of attorney, and a durable power of attorney. It is important to make sure what form you are executing as to what uses the document has under different circumstances.
Limited Power of Attorney
For example, a limited power of attorney is just that. It limits the scope of what can be done by the attorney in fact or the agent. A limited power of attorney can be for such purposes as banking transactions or real estate transactions. A limited power of attorney can only be used for the specified purpose.
General Power of Attorney
A general power of attorney can be broad-based and give an assortment of powers to the attorney-in-fact or agent; however, it is null and void if the principal cannot subsequently make decisions.
Springing Power of Attorney
Some states have a springing power of attorney, which means that it is effective on the happening of such later events, such as a declaration by a physician that the principal is incapacitated. Florida does not currently recognize a “springing” power of attorney, unless the document was written prior to October 1, 2011.
Durable Power of Attorney
The durable power of attorney is a general broad power of attorney that outlasts the capacity of the principal. In Florida, a durable power of attorney is effective the day it is signed, and the attorney-in-fact can use the document immediately. The durable power of attorney is durable in nature because it outlasts the capacity of the principal as previously stated. The attorney-in-fact can use the document throughout the incapacity of the principal if the document has the special wording that provides the power to survive the incapacity of the principal. This document is effective from the date it is signed until the death of the principal.
An individual does not have to be incapacitated in order for the agent or attorney-in-fact to use the power of attorney. The power of attorney can be used from the date it is executed. The whole purpose of a durable power of attorney is to facilitate the management of an incapacitated individual’s income and assets, with a minimum of hassle.
Power of Attorney Superpowers
While the durable power of attorney gives some broad powers, there are some specifics, what can be referred to as the superpowers, that must be enumerated and initialed by the principal. Those powers are as follows:
1. The attorney-in-fact shall have the authority to act as if my attorney-in-fact were me for purposes of creating a revocable or irrevocable trust for any reason which the attorney-in-fact deems advisable and appropriate in my attorney-in-fact’s sole and absolute discretion. The attorney-in-fact shall have the full authority, to transfer any assets the principal may own into a trust previously created or into a trust the attorney-in-fact has created. This authority to transfer assets into a revocable or irrevocable trust is not limited by the size, nature, or whereabouts of the asset and includes real property including the homestead, should the principal own such real property, and includes stocks, bonds, mortgages, promissory notes under which the principal is the oblige, and all other assets in which the principal owns an interest, tangible or of mixed nature and wheresoever situate.
2. To amend, modify, revoke, or terminate any trust either created by the principal or for the principal by the agent
3. To make a gift. The attorney-in-fact shall have the authority to make gifts of any or all of the principal’s assets, intangible or tangible, whether below or above the federal gift tax exclusion amount under 26 U.S.C. §2503(b) including homestead property, to any person or entity whom the attorney-in-fact decides to be appropriate and reasonable and in the principal’s best interest including the right of the attorney-in-fact to make gifts to the attorney-in-fact or to the attorney-in-fact’s family.
4. To create or change rights of survivorship.
5. To create or change a beneficiary designation.
6. To waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
7. Disclaim property and powers of appointment.
Two types of acts may be incorporated by a simple reference to the statutes in the power of attorney, meaning when either of these phrases is included in the power of attorney, all of the acts authorized by the referenced statute may be performed by the attorney-in-fact even though the specific acts are not listed in the power of attorney itself. The two acts are as follows:
1. Have all authority to conduct banking transactions as provided in section 709.2208(1), Florida Statutes.
2. Have all authority to conduct investment transactions as provided in section 709.2208(2), Florida Statutes.
It does not hurt to have additional powers enumerated and initialed by the principal. This will help with third parties accepting the documents and the powers therein defined.
Additional Superpowers
The additional powers that are important to be enumerated may be as follows:
1. Collect all sums of money and other property that may be payable or belonging to the principal.
2. To execute receipts, releases, cancellations, or discharges for any money or property.
3. To prepare, sign, and amend from time to time a Trust Agreement on the principal’s behalf as Settlor and/or Trustee, on terms my attorney-in-fact decides to be appropriate and act as a Trustee for the principal’s income from Social Security and pensions so as to comply with the dictates of the Florida Department of Children and Families or successor agency to enable me to obtain Medicaid benefits.
As one can see this document is a very powerful document. It gives the attorney-in-fact or agent the authority to act on behalf of the principal with any financial decision that needs to be made. While the power of attorney conveys much authority, it does not convey a property interest to the attorney-in-fact or agent. It is not only important that the document be drafted properly to preserve the protection but that it be executed properly.
It is important to have an attorney draft the power of attorney as pre-printed forms may fail to provide the protection desired. In Florida, a power of attorney must have two witnesses and a notary to be valid. The notary may serve as one of the witnesses. The need for a court proceeding, such as guardianship, can be eliminated if there is a durable power of attorney document. The principal may revoke a power of attorney at any time by sending a notice of revocation to the agent or attorney-in-fact. As previously stated, the power of attorney is also null and void at the death of the principal. At the death of the principal, an executor or personal representative would need to be appointed to continue to act on behalf of the principal. That individual is appointed through a Last Will and Testament which is discussed later. Under a power of attorney, the courts do not have the authority to oversee the transactions of the agent. In the event of misuse or misappropriation of funds, someone on behalf of the principal would have to act and potentially file an action against the agent to recover funds. An agent under a power of attorney is not required to be bonded, therefore in the event of misuse of the principal’s funds, the principal has no recourse to recoup the money unless a lawsuit is brought against the agent and the agent has funds or assets with which to obtain funds for a judgment. Misappropriation of funds is referred to as elder abuse. Elder abuse includes theft of the person’s money or property. The financial abuse of individuals by the repeated improper or illegal use of their assets is exploitation.