What Is a Power of Attorney?
A power of attorney is a document authorizing someone to act on your behalf. You determine how much power the person will have over your affairs. Your power of attorney may be a general or limited power of attorney. A general power of attorney authorizes your agent to conduct your entire business and affairs. A limited or special power of attorney authorizes your agent to conduct specified business, perform specified acts, or make certain decisions on your behalf.
In any power of attorney, you are considered to be the “principal” and the person to whom you assign the power is your “agent” or “attorney-in-fact.” Your attorney-in-fact does not have to be a lawyer, but it should be someone you trust a great deal.
What Is a Durable Power of Attorney?
When a power of attorney is considered “durable,” it remains valid even if you become incompetent or incapacitated. An ordinary power of attorney expires if a person becomes unable to make his or her own decisions. Durable powers of attorney can be prepared either to take effect immediately or to go into effect only if and when you become unable to make decisions for yourself (called a “springing durable power of attorney”).
The power of attorney form should indicate what kind of power of attorney you want. You may want to consult an attorney regarding the type of power of attorney you want.
When Should I Use a Power of Attorney?
You may want to use a power of attorney if you are unable or unwilling to handle your financial affairs yourself. You may also use a power of attorney to allow another individual to take care of your responsibilities at the time you become incapacitated. Having a power of attorney does not restrict you from doing these things on your own but instead shares these responsibilities with someone else.
How Much Power Does a Power of Attorney Have?
You may give your attorney-in-fact as much or as little power as you wish. You could choose to give your attorney-in-fact power to do some or all of the following:
- Use your assets to pay your everyday expenses and those of your family;
- Buy, sell, maintain, mortgage, or pay taxes on real estate and other property;
- Manage benefits from Social Security, Medicare, or other government programs, or civil or military service;
- Invest your money in stocks, bonds, and mutual funds;
- Handle transactions with your bank and other financial institutions;
- Buy and sell insurance policies and annuities for you;
- File and pay your taxes;
- Operate your small business;
- Claim property you inherit or are otherwise entitled to;
- Hire someone to represent you in court; and
- Manage your retirement accounts.
How Do I Create a Power of Attorney?
You don’t need an attorney to prepare a power of attorney. However, you should know that powers of attorney are required to be:
- In writing;
- Signed by you in front of a notary public;
- Dated appropriately; and
- Clear on what powers are being granted.
If you want to create a durable power of attorney, you must include a statement such as: “This power of attorney shall not be affected by incapacity or incompetence of the principal.”
View a Minnesota’s Standard Power of Attorney Form, as set out in Minn. Stat. § 523.23 (2016). This form allows you to choose whether or not you want the power of attorney to be durable. In addition, an alternative form may be prepared by the Commissioner of Military Affairs for use by active service members. A legal power of attorney form can also be purchased at legal forms stores or drawn up on your own.
Some banks and brokerage companies have their own power of attorney forms. If you want your attorney-in-fact to have an easy time with these institutions, you may need to prepare two (or more) durable powers of attorney, one using your own form and one or more using the forms provided by the institutions with which you do business.
What Happens If I Don’t Have a Durable Power of Attorney for Finances?
If you become incapacitated and you haven’t prepared a durable power of attorney for finances, a court proceeding for conservatorship is probably inescapable. Your spouse, closest relatives, or companion will have to ask a court for authority over at least some of your financial affairs.
If you are married, your spouse has some authority over property you own together. He or she may pay bills from a joint bank account, for example. There are significant limits, however, on your spouse’s right to sell property owned by both of you.
If your relatives go to court to get someone appointed to manage your financial affairs, they must ask a judge to rule that you cannot take care of your own affairs and request that the judge appoint a conservator. When this person is appointed, you may lose the right to control your own money and property. Conservatorships are discussed more here.
When Does a Power of Attorney End?
If you are mentally competent, you may revoke your original power of attorney at any time with a signed document, such as the form found here.
The revocation is not effective until the attorney-in-fact has received notice of the revocation. If you do not revoke it, a power of attorney ends at your death. If you want your attorney-in-fact to have authority to wind up your affairs after your death, use a will to name that person as personal representative.
Also, if you get a divorce and your spouse is your attorney-in-fact, your ex-spouse’s authority is automatically terminated. Finally, if there is no one to serve as attorney-in-fact, the power of attorney ends. To avoid this problem, you can name an alternative attorney-in-fact in your document.
The maker of the power of attorney may hold the original power of attorney document. This can allow the maker to remain in control and generally results in a simple revocation.