WHAT YOU SHOULD KNOW ABOUT POWERS OF ATTORNEY

Powers of attorney are important documents that can save you and your family a lot headaches and expense. A power of attorney is a written document by which you authorize someone you trust -- called an "attorney in fact" -- to act on your behalf. The authority you give your attorney in fact can be either general ("I want you to act for me in all circumstances") or specific ("you can sign a title to sell my car while I’m out of town.") The powers given to the attorney-in-fact can be as broad or specific as you wish and can last until you die or some earlier time. To be valid, the power of attorney must be signed according to the law of your state of residence. Generally, this means you must sign before two witnesses or a notary public.

Unless your power of attorney is "durable," the authority you grant to your attorney in fact will terminate when you become incapacitated or disabled – a time when you need it most. That’s why it’s important for you to decide if you want your attorney in fact to continue to act after you become disabled or incapacitated. In some states, the power of attorney is presumed to be "durable" unless wording to the contrary is included in the document; in other states, the document must specifically state that it continues past your incapacity. You should find out about this important issue from your lawyer before you sign anything.

By using a durable power of attorney, your attorney in fact can inexpensively deal with business and other matters should you become disabled or incompetent as a result of Alzheimer's Disease, a severe injury, or a hospitalization. Because of the illness or injury, it may be necessary to have someone to sign checks, sell or gift real estate and other assets. For example, if real estate is jointly owned by a husband and wife and one spouse is unable to transfer the asset, since each can only deal with his or her individually-owned assets, it may be necessary to have the court appoint a guardian to represent the disabled spouse. As with most court procedures, a guardianship proceeding takes time, it is costly and adds to the problem already being endured by the family. A durable power of attorney cam help you and your family avoid these difficulties.

Although there are no restrictions on who you can name as your attorney-in-fact – other than a person who is over age 18, generally, spouses name each other and then a child or children as a successors in the event the primary attorney in fact dies or is unable to act. Some people do not want to name one child over another as attorney in fact and grant powers to two children who are empowered to make decisions jointly. Although requiring joint action can prevent situations where one child could abuse his or her powers, if the children can not agree, the court .

As a precautionary measure in estate planning, power of attorney is suggested before the onset of a disability. For that reason, the powers given to the attorney-in-fact should be broad enough to cover anything that can be expected – even making gifts, which sometimes creates a number of issues and problems. Take the father who appointed his son as attorney-in-fact with general powers. The father later became disabled and the son began making gifts of his property to himself and his brothers and sisters in order to reduce the estate taxes at his father’s death. However, because the power of attorney did not specifically provide the son with the power to make gifts, these tax-saving options were not available.

But giving the power to make gifts can create problems: If the father above had granted gifting powers to his son and, as the father became sicker, the son decided to put the father's property in his name. When the father died, his will named his four children as equal beneficiaries, but because much of the property was no longer part of the estate, three of the children received very little. They sued their brother, contending that it was not proper for him to make gifts of the assets to himself. After reviewing the power of attorney which permitted gifting, the court approved the son’s activities. This problem could have been avoided if the power of attorney included a provision that any gifts to children would be made in equal shares.