POWERS OF ATTORNEY
POWERS OF ATTORNEY
Powers of attorney are believed to have
originated in England during the time of the Crusades. Because a
knight would be away from his home and property for long periods with
little or no communication with those who remained behind, it became
necessary for him to designate someone who would have the power to act
for him with respect to his property during his absence. As
communication and travel became easier and faster, the primary purpose
of powers of attorney changed to providing a mechanism for dealing with
and managing a person's property if and when he was not able to do so
himself because of physical or mental disability. The problem,
however, is that according to the English common law a power of attorney
is automatically terminated or revoked when the person granting the
power becomes disabled.
Recognizing that most persons who grant
powers of attorney do so anticipating that the power will be effective
upon their disability, most states within the past ten or so years have
made statutory provision for "durable" powers of attorney. In
Arizona a durable power of attorney should provide that "this power of
attorney shall not be affected by the disability of the principal" or
"this power of attorney shall become effective only upon the disability
of the principal." Of these two forms, the second is sometimes
known as a "springing" power. The power of attorney should be
drafted to provide some objective standard of disability, such as proper
certification by an adult child and the family physician.
Powers of attorney, whether durable or not,
can be either "general" or "special." With a general power of
attorney, the owner of property, called the principal, grants to someone
else, called the attorney‑in‑fact, complete legal power to act for the
principal with respect to his property. Such a power would empower
the attorney‑in‑fact to collect funds, cash checks, draw on bank
accounts, manage and sell real property, sell securities and reinvest,
pay bills, and generally expend funds for the benefit of the principal.
The obvious danger is that the attorney‑in‑fact can wrongfully use the
power for his own benefit. It is important, therefore, to give a
general power of attorney only to a completely trustworthy person, or,
perhaps, to give a joint power to two persons so that one can check on
the other.
A special, or limited, power of attorney is
less dangerous because it gives the attorney‑in‑fact the power only to
deal with assets in a restricted way or only to deal with certain
assets. For example, the power of attorney might give the
attorney‑in‑fact the power to write checks only on a specified bank
account, the power to sell only a specified stock or piece of real
property, or the power only to transfer assets to a trust created by the
principal. Banks and many stock brokers have their own forms of
limited powers of attorney for use at such bank and brokerage house; so,
if the power is to be limited to dealings at a specific bank or stock
broker, it is probably easier to use their procedures.
ALL POWERS OF ATTORNEY ARE AUTOMATICALLY
TERMINATED OR REVOKED UPON THE DEATH OF THE PRINCIPAL.
Establishing joint tenancies usually gives
either joint tenant the power to deal with the property, so a power of
attorney may not be necessary if one of the joint tenants becomes
disabled. If, however, the property is real estate, each joint
tenant must sign, and costly delays in dealing with such property may
result if one joint tenant becomes disabled. If a person becomes
disabled without providing some mechanism for someone else to manage and
deal with his property, such as a living trust or a power of attorney, a
conservator must be appointed by the court, which involves a not
inexpensive legal determination that the person is incompetent.
The conservator must post a bond, again not inexpensive, and account
annually to the court. Trustees and attorneys‑in‑fact are not
required to post a bond or report to any court.
Formerly powers of attorney applied only to
property. Recent changes in the law now make it possible to
legally empower another to make decisions regarding his/her person.
For example, a person can now give someone else the power to consent to
his/her medical treatment. Most hospitals and health care
providers recognize "medical powers of attorney" which give someone else
the power to give or refuse consent to medical treatment.
Arizona law changed a few years ago to
require that certain powers of attorney be witnessed. An
acknowledgement is sometimes necessary. Also, certain provisions
in certain powers of attorney must be witnessed. Many old forms
still abound, leaving those who do-it-themselves at great risk.
Use a pre-printed form with great caution and only if you are willing to
accept the risk that the form may not be valid or effective.
As a result of the Health Insurance
Portability and Accountability Act, many health care providers are
no longer recognizing powers of attorney that do not contain a specific
reference to HIPAA, or do not contain specific HIPAA language.
Thus, many older powers of attorney may no longer be useful.
Powers of attorney that were prepared before HIPAA should be reviewed to
determine if they are still effective.
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