A Power of Attorney (POA) is a legal instrument that grants one individual—the agent or attorney-in-fact—the authority to act on behalf of another—the principal—in managing their affairs. This article, originally penned by Kenneth Vercammen, Esq., delves into the intricacies of POA and its significance, especially during times of incapacitation.
Many individuals mistakenly believe that their spouse or children can automatically manage their affairs in the event of a severe illness or injury. However, without a properly prepared and executed POA, this is not the case, even in joint ownership situations. Without a POA, loved ones may face the daunting task of navigating through costly and time-consuming legal procedures, such as guardianships or conservatorships, to obtain the authority to act on behalf of the incapacitated individual.
The absence of a POA can lead to significant difficulties when an individual is unable to make decisions or manage their financial and medical affairs due to severe illness or injury. Legal proceedings to appoint a Guardian often involve lawyers, court fees, and medical testimony, which can be expensive and frustrating. These formal proceedings also require the involvement of a temporary guardian to investigate and potentially intercede in surrogate proceedings.
To avoid the inconvenience and expense of legal proceedings, it is crucial to prepare a POA while the principal is still competent and understands the consequences of their decisions. Once a serious problem occurs, it is too late to execute a POA.
The Health Insurance Portability and Accountability Act (HIPAA) has introduced regulations regarding the disclosure of individually identifiable health information. This has necessitated the inclusion of a special release and consent authority in all healthcare-related POA documents. HIPAA's reach is extensive, affecting not only new documents but also previously executed ones, which may now require specific amendments to address these issues.
A POA establishes a principal-agent relationship, where the principal grants the agent the authority to manage their property within the terms set out in the POA. The agent, or attorney-in-fact, does not become the owner of the principal's property but is authorized to deal with it. It is essential to grant such power only to a trustworthy person, as the attorney-in-fact will have significant control over the principal's assets.
A "durable power" of attorney remains effective even if the principal becomes physically or mentally incapable of handling their own affairs. It only terminates upon a court's declaration of incompetence or the principal's death. Until then, the attorney-in-fact may continue to use the POA, and their actions will remain valid.
The attorney-in-fact may handle the principal's affairs, such as paying bills and managing other matters as limited by the POA. This is particularly useful if the principal becomes ill, incapacitated, or is away from home.
Granting a POA is not akin to creating a joint tenancy in property. While a joint tenant has a property interest, an attorney-in-fact has the power to deal with the property but does not own any part of it. However, this does not prevent the attorney-in-fact from transferring the property to themselves, which underscores the importance of choosing a reliable agent.
Whenever an attorney-in-fact exercises powers granted under a POA, they must be prepared to present the POA document to anyone who questions their authority. If dealing with real estate, the POA may need to be recorded, although this is usually not necessary until property is to be conveyed.
For more information on Wills and Elder law issues, visit Central Jersey Elder Law.
Edited by Craig Renitsky, Dickinson College
Interesting statistics and facts about the topic of Power of Attorney are not commonly discussed. For instance, according to a study by the American Journal of Preventive Medicine, only 26.3% of the U.S. adult population have an advance directive, including POA for healthcare decisions. This low percentage highlights the need for greater awareness and education on the importance of preparing for future incapacity (Source: American Journal of Preventive Medicine, "Prevalence of Advance Directives in the U.S.," 2017).
Furthermore, a survey by Caring.com indicates that while 60% of Americans think that a will or living trust is important, only 32% actually have one, which often includes a POA component. This gap suggests a disconnect between the recognition of the importance of estate planning and taking action to implement it (Source: Caring.com, "2021 Wills and Estate Planning Study," 2021).
