Power of attorney (POA) means a person, called the principal, chooses someone whom they trust, called the agent, to handle their affairs and make decisions if they are not in a position to do so themselves.
This can only legally be done if the principal has the requisite mental capacity to grant this power to another person.
Once a person loses their mental faculties such as in an automobile accident or through a disease such as Alzheimer’s disease, they may no longer grant the power of attorney to another person.
There are many decisions a POA can be given the power to make such as the power to:
- Make gifts of money or property
- Make financial decisions such as buying or selling stock
- Make healthcare decisions such an emergency surgery for the principal
- Recommend a guardian for a minor child
Even if a principal grants an agent the power of attorney over their affairs, they are still responsible for their affairs, and can revoke the POA at any time.
The main reasons it is recommended to designate a POA are:
- If property is owned by more than one person
- If bank accounts have more than one name
- If brokerage accounts have more than one name
- If the principal is single and going on a trip
- If the principal will have major surgery
If a person dies, his or her property and money will be transferred to the benefactors of the will. However, if they become incapacitated, the joint owner will have very limited authority over the share of the joint property or account unless they have power of attorney.
Three Types Of POA
Durable – This type becomes effective as soon as it is signed and remains in effect unless it is canceled. It must clearly state that the agent has the power even if the principal becomes incapacitated.
Springing – This type begins when a specific event takes place and the principal becomes incapacitated. The designated moment of the springing or beginning of this POA should be clearly mentioned in the document.
Conventional – This type begins when it is signed and remains in effect until the principal becomes incapacitated. The document must clearly state that the principal wants their agent to make decisions for them if they are unable to do so for themselves.
A power of attorney letter is not really a letter in the conventional sense. It is a legal document that must have specific instructions. It can be put in formal, business letter format, if it has all of the legal requirements.
To be legal, the power of attorney letter must be signed by the principal, witnesses, a notary public or other official according to the laws of the state where the POA is written.
The principal should not sign the document until they are in the presence of a notary public.
A POA could also be created for a specific transaction such as selling a business, and cancelled when that transaction is completed.
Here is a sample power of attorney letter. It may be kept by a lawyer, if the principal had legal help writing it. Otherwise it should be sent by certified mail.
It should be noted that one sample may not be suitable for every jurisdiction including a county, city or state. The principal should make sure they are following the laws in their state.
Sample Power Of Attorney Letter
I, Name of Principal, who currently resides at Address of Principal am of sound mind, do hereby name Name of Agent who currently resides at Address of Agent as my lawful and true attorney in fact, to act in my name and place to do and perform the following on my behalf.
Powers Are Listed Here
(The power to write checks on bank account, buy and sell property or stocks and whatever the principal chooses.)
The following property, interests or rights shall be subject to this Power of Attorney:
What the Agent Can Do Is Listed Here
(The assets that are subject to the agent’s authority such as property, bank accounts or stocks)
This Power of Attorney becomes effective on DATE.
This Power of Attorney will be in effect in the event that I should be declared incompetent, become disabled or incapacitated.
This legal Power of Attorney will terminate on DATE unless I have canceled it, which I may do at any time and in any manner.
The agent will be compensated for services listed in Power of Attorney as follows:
(If the Agent is to be paid for their services, it should be stated here)
This Power of Attorney is in accordance with the laws of the State of STATE.
In front of witnesses, I have signed this power of attorney document.
Accepted and Agreed to by
Subscribed and sworn to before me on DATE
Notary Public’s Signature