1. WHAT IS A POWER OF ATTORNEY?
A power of attorney is a document in which you state
that you give someone else (usually a relative or friend) the authority
to make certain decisions and act on your behalf. The person to
whom you give these powers is called an "agent" or "attorney-in-fact."
You are called the "principal." Just because the word
attorney is used does not mean that the person you give authority
to has to be a lawyer.
Executing a power of attorney does not mean that
you can no longer make decisions; it just means that another person
can act for you also. For example, you may be hospitalized for a
brief period of time and need someone to deposit your checks in
the bank or pay your bills. As long as you are capable of making
decisions, the other person must follow your directions. You are
simply sharing your power with someone else. You can revoke the
agent's authority under the power of attorney at any time if you
become dissatisfied with what they are doing.
The type of power of attorney provided by Legal
Services for the Elderly is a durable power of attorney. The word
"durable" means that your agent can continue to make decisions
for you if you become incapacitated. The agent will still be obligated
to act in your best interest, making decisions and using your money
and property only for your benefit.
By establishing a durable power of attorney, you
are giving the agent some of the following powers:
- To spend your money, cash checks, and withdraw
money from your bank accounts
- To enter into contracts on your behalf
- To pursue insurance claims and legal actions
If you do not establish a durable power of attorney
and you become mentally incapacitated, it may be necessary for a
court to appoint a guardian or conservator for you.
2. HOW TO CHOOSE AN AGENT?
The person you have designated to be your agent
or attorney-in-fact assumes certain duties and responsibilities.
The most important obligation of the agent is to act in your best
interest. This means they must always follow your instructions.
The agent is a "fiduciary", which means that he or she
must act with the highest degree of good faith in your behalf.
Although your agent is supposed to make decisions
in your best interest and to use your money and property only for
your benefit, he or she has great freedom to do as he or she pleases.
Therefore, it is essential to choose someone whom you trust when
you sign a power of attorney. Before selecting an agent or attorney-in-fact,
ask yourself the following questions:
- Does this person understand my feelings and
my point of view? Will he or she follow my wishes if I am ever
incapacitated?
- Is this person willing to do the work and spend
the time handling my affairs?
- Is this person available to visit me or to
keep in contact by phone?
- Is this person knowledgeable about finances?
If not, would this person seek the help of experts?
An attorney-in-fact must keep your money separate
from his own. He or she must not personally be involved in or stand
to profit by any transaction where he/she represents your interests.
He must keep separate and accurate records regarding all transactions
he engages in for your benefit.
An attorney-in-fact is not permitted to gift or
transfer any of your money, personal property or real estate to
himself unless the power of attorney contains specific authority
to do so. The power of attorney form prepared by Legal Services
for the Elderly contains a provision which allows your agent to
gift or transfer property to your spouse. This means that if your
agent is your spouse, he can gift to himself. Also, an agent other
than your spouse can gift and transfer property to your spouse.
The power of attorney from prepared by Legal Services for the Elderly
does not permit the agent to gift property to other individuals
such as your children. Such gifts could affect your eligibility
for long term care benefits under Medicaid and could result in other
serious consequences.
If you want your agent to have that type of authority,
you will need to ask a private attorney to draft a power of attorney
document for you. Most people with property (such as a house or
a camp), savings (such as bank accounts, stocks, bonds, certificates
of deposit) and income (such as salary, pension, Social Security
benefits) should seek the advice of a private attorney to draw up
a power of attorney. The materials prepared by Legal Services for
the Elderly do not give adequate advice on gifting, long term care
and estate planning. The financial durable power of attorney form
provided by Legal Services for the Elderly is a basic form for people
60 and over with low income and no significant assets; it gives
the agent power to handle all aspects of your financial affairs.
3. HOW DO I CREATE A POWER OF ATTORNEY?
When you fill out a power of attorney form you are
stating what you, as the principal, want the person acting for you,
the agent, to be able to do for you. For the power of attorney to
be effective you must be competent to give this authority; that
is, you must know and understand what types of decisions need to
be made. The financial durable power of attorney should be witnessed
by a notary public or attorney. If the durable power of attorney
deals with the power to sell, lease, or otherwise dispose of real
estate, you should have the power of attorney recorded in the Registry
of Deeds, located in the county courthouse where the property is
located. If your agent is going to start making transactions for
you immediately, you should give him or her the original financial
durable power of attorney to show to any person, business or organization
involved in the transactions, such as your bank. You should keep
a copy for your records. You may also choose to keep the original
yourself if you do not want your agent to start conducting you business
right away.
4. CAN I CREATE A POWER OF ATTORNEY
WHEN I AM MENTALLY INCAPACITATED?
No. In order to create a power of attorney, you
must know and understand what you are doing. A person who is mentally
incapacitated is not capable of meeting these requirements.
5. CAN I GIVE A POWER OF ATTORNEY
IF I CANNOT SIGN MY NAME?
Yes. If you are mentally capable but physically
unable to sign your name, any mark made with the full intention
that this be your signature is acceptable.
6. CAN I REVOKE MY POWER OF ATTORNEY?
Yes. If for any reason you are no longer comfortable
having your chosen agent or agents handle your affairs, you have
the right to revoke the power of attorney at any time, as long as
you are of sound mind. In order to revoke a durable power of attorney,
you simply write or type a statement which includes the following
(forms are available from LSE):
- Name and date
- You are of sound mind
- You wish to revoke the durable power of attorney
- Specify the date the original durable power of
attorney was executed
- Specify the person or persons named as your agents
- Your signature
Distribute copies of that statement to your agent
and to any institutions and agencies, such as banks and hospitals,
that had notice of your power of attorney. After you revoke the
durable power of attorney, you can 1) execute a new durable power
of attorney naming someone else as your agent to handle your affairs;
or 2) handle your affairs on your own.
7. IS MY POWER OF ATTORNEY EFFECTIVE
AFTER I DIE?
No. A power of attorney ends upon your death. Thereafter
your will, or the law of intestacy, governs the handling of your
estate. A power of attorney document is not a substitute for a will.
8. IS THE AGENT REQUIRED TO KEEP
RECORDS?
The agent should keep separate and accurate records
and make them available to you or to persons you designate.
9. DOES AN AGENT GET PAID?
This depends on the relation of the agent and the
principal and the duties involved. Normally, in family situations
where the attorney-in-fact's duties are simple, no payment is provided.
However, if and attorney-in-fact has to run a business or manage
complicated financial affairs, then payment if appropriate. Legally,
no payment is required. If payment is desired, it should be clearly
stated in the power of attorney document. The Legal Services for
the Elderly form allows an agent to be reimbursed for costs paid
on your behalf.
10. ARE THERE ALTERNATIVES TO A
DURABLE POWER OF ATTORNEY?
Yes, guardianship and conservatorship are alternatives.
However, these can only be granted by a probate court. Managing
your affairs by either alternative can be accomplished more easily
and cheaply with a power of attorney. However, in a situation where
court review of your affairs is desired, these more formal arrangements
may be preferred.
We hope this information has helped you understand
the basic principles of powers of attorney. Legal Services for the
Elderly offers power of attorney clinics in Augusta, Bangor and
Portland where you can execute the document free of charge. LSE
may also be able to refer you to a private attorney, either at a
full or reduced fee. If you have any questions, please call the
Legal Services for the Elderly Hotline at 1-800-750-5353 or (207)
623-1797.
