The Power of Attorney

A persuasive argument can be made that every adult needs to execute a durable  power of attorney so that some designated person can act for that adult in the event of disability or incapacity.

According to the Alzheimer's Legal Guide, "The single most important document to put in place is a durable power of attorney so that a family member or trusted friend will have the legal authority to carry out your wishes if you can no longer speak or act for yourself."

The person granting the authority for someone else to act on their behalf is known as the "principal".  The person or persons who are granted the authority to act on behalf of another are called "agents" or an "attorney-in-fact"

A standard power of attorney (i.e., not durable) expires when the principal becomes incapacitated or dies. A "durable" power of attorney explicitly authorizes the agent to act for the principal in the event of death or incapacity. In some cases, the agent may be empowered to act when the POA is executed. In most cases, the POA document provides that the agent is not authorized to act for the principal unless the principal is incapacitated. It's common to state in the POA what conditions must exist for the agent to become authorized to act for the principal. (A "springing power.)

A POA can authorize the agent to manage the financial affairs of the principal and to make health care decisions for the principal. A more common approach is to have one POA for financial decisions and another for health care decisions.

One of the most difficult issues relating to a POA is whether the agent should have gifting powers after the principal is incapacitated. Where the agent is the sole heir of the principal, this can give the agent a lot of flexibility regarding estate taxes. Where there are multiple heirs, the authority of an agent to make gifts will usually require careful consideration by the principal and customized drafting by an attorney.

Another power that is not always included in a POA is a broad grant of authority to act of behalf of the principal with respect to all tax matters. Without such authority, complications and delays will arise in dealing with the IRS and with state tax regulators.

The POA should also have explicit authority for the agent to act on behalf of the principal with respect to applications for Medicaid.

Vernon K. Jacobs

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