What Is a Power of Attorney?

Episode 11: Hello, I’m Louisville estate planning attorney Brandon Lawrence. Today I’m talking about Power of Attorney. Power of attorney is a popular topic lately. Quite a few people ask me to draft powers of attorney for them throughout the year. In Kentucky, you, the principal, need to sign the power of attorney and get it notarized. A copy of the power of attorney is as effective as the original.

What Is a Power Of Attorney?

You may ask what a power of attorney is. It’s a legal document where you give someone else, your “agent”, authority to transact for you. KRS457 covers power of attorney, if you want to look that up. There are a few types of powers of attorney.

You’ve got the general power of attorney, and the general power of attorney allows the appointed person, the agent, to carry out the affairs of the principal.

You’ve got the limited power of attorney, and that’s created for a limited purpose, like facilitating the sale of a house. And once that transaction is completed, the limited power of attorney ends.

You’ve got the durable power of attorney. The durable power of attorney remains in effect after a person becomes incapacitated. And in Kentucky, the power of attorney is assumed to be durable unless it expressly states otherwise.

These powers of attorney become effective immediately, meaning as soon as the principal signs the power of attorney and delegates the agent to be their power of attorney, then it’s effective.

With these powers of attorney, the agent you designate can make decisions on your behalf. Now you can still make decisions, but the agent also is able to make decisions.

The next power of attorney does not become effective immediately. And this is the last one we’ll talk about. It’s called the springing power of attorney. Springing power of attorney springs into effect, just like it sounds, when a person becomes incapacitated and not before.

A person you appoint the power of attorney, you want to trust them and you want to be reasonably certain they’re going to do what’s in your best interest. Now, you have occasions where powers of attorney may go off the rails a little bit. Say for instance, they can steal from you, do some fraudulent things, but they’re legally bound not to, of course. So that’s why it’s important to make sure you pick somebody that you can trust and that’s going to make decisions in your best interest. Now, the power of attorney should expressly state what the agent that you designate the power of attorney is allowed to do.

Am I Limited to 1 Power of Attorney?

You could appoint more than one person as your power of attorney.

Say for instance, you could appoint someone to be power of attorney for financial reasons and a person to become your power of attorney for health reasons, to make health decisions for you.

POAs Involving Banks and Financial Institutions

Now, some banks or financial institutions have their own forms for power of attorney. So what you should do is before, say for instance, say you designate your child to be your power of attorney and they take the form that your attorney’s drawn up for you and take it down to a financial institution or a bank, they can say, hopefully not, but they can say that, “Hey, we’re not going to accept this or we have to run this through legal and it may take a little bit longer to actually get what you need done.” But in the alternative, they could say, “Hey, we prefer you to use our own in-house form for the actual power of attorney.” So you need to check with the financial institution to see if they require you to use their specific form.

And that shouldn’t be a problem. You just go and make sure that you fill that one out and go through whatever process that they’d like you to go through before you draw up anything.

Do I Need to Go to Court to Record My Power of Attorney Document?

And your power of attorney does not have to be recorded at the courthouse, but it may be useful to record it because again, just like the bank, you never know who you’re going to be dealing with. So if it’s a bank, it could be a mortgage company, it could be another financial institution, medical professionals, they may want to see that the power of attorney has been recorded and have a court sealed stamp or something like that just to make sure that it’s official. So you may want to take that extra step and do that.

Is My Power of Attorney Valid After I Die?

Now the power of attorney stops when the person giving the authority dies. A lot of people don’t know that. They think that it continues once you pass away and it doesn’t. That’s when something like a document like a Will or a trust goes into effect and you go through that process right there. The power of attorney is only effective while the principal is living.

When Should I Appoint a Power of Attorney?

So again, I reiterate, appoint a person, your agent, power of attorney while you are competent so you lessen complications. Otherwise, the power of attorney may not be considered valid and appoint people you trust to act in your best interest.

Appoint someone as your power of attorney before you become incapacitated. And just to reiterate, appoint the right responsible person.

You can anticipate some things, not all things, but you probably want to appoint someone that you trust in this respected among people that you know that may be involved in any process that you’re going to need that power of attorney for. And be specific in your power of attorney.

For example, for real estate transactions, be specific about the property and what transactions the person you designate power of attorney can deal with. Because a lot of times if you have, like I said before, if you have a general power of attorney and you say a person can deal with finances, that’s going to mean finances. That’s going to mean everything. Now, if you want them to deal with something specifically, then you need to write that within that document, make sure that’s within that document, the power of attorney.

And for healthcare decisions, be specific about what authority you’re going to be giving the power of attorney. For example, if you’ve given them the power to make medical treatment decisions or make decisions about keeping you on life support, medication, things like that, then you want to be specific and make sure that there’s no doubt about what you are giving that agent as the principal authority to do.

For contract and loans, for instance, does that power of attorney have the authority to enter into contracts on your behalf? And possibly what are the funds to be used for? You can put parameters around that to make sure that your specific wishes are carried out.

Now going down the line, the principal, you, you’re going to be the principal, can nominate a guardian or conservator for your estate within your power of attorney. Say if there’s some type of snafu or question about your estate after you pass, then you could have previously nominated a guardian or conservator within that power of attorney to handle your estate after you pass away. The court is inclined, more likely to go along with that person that you nominated.

Consider Designating a Successor Power of Attorney

So there are quite a few things that you’ve got to be aware of and be cognizant of when you’re writing this document because it’s a definitive document and you should have a structure to make sure that it carries out your wishes because it’s going to be important because that dictates the treatment that you get, your finances and your quality of life overall. So you also, in choosing and nominating an agent, you also want to probably name a backup agent or successor power of attorney because the person you name initially as your agent may predecease you or be incapacitated before you. It happens with married couples.

Say for instance a husband nominates his wife as the agent, which is pretty natural. If you make a power of attorney early on, 10-15 years pass and the husband’s wife is maybe having some health complications, maybe some dementia stuff, or she may predecease him or vice versa. The husband may predecease his wife if she’s nominated the husband as her agent for power of attorney. They predecease and you don’t change it or you haven’t named a backup or a successor power of attorney, then you’re pretty much stuck. You don’t have anybody because the document hasn’t named anyone.

So you probably want to name, you want to kind of be careful about if you name an agent within your generation, you probably would like to name an agent that’s a backup agent not in your generation, 10, 15 years younger at least, that’s going to be able to, that you trust and is responsible to make some decisions about your healthcare or about your finances if you’re incapacitated and unable to write and think clearly.

Like I said, we’re dealing with dementia, things like that, to be a decision maker for you, you want somebody a little bit younger, so that gives you, at least as a backup, to give you more of an opportunity to be there and be able to make decisions if and when your incapacitation happens. So that’s something to think about as well.

Conclusion

I’ve left you with quite a few things to think about as far as a power of attorney because it is a popular tool to use when in case you become incapacitated because you never know. And as I’ve told you in the past, wills, trust, power of attorneys, health directive, things like that, guardian documents, conservative documents, those things are tools and guidelines that help keep some type of structure in case the worst happens or something unforeseen happens, which possibly can happen. And a lot of times does happen. It keeps things going as smoothly as possible and helps people carry out their wishes and work in the best interest, for them.

So hopefully this has been informative to you. If you’d like to, drop a line in the comments because I love to hear about comments and that helps me out with future topics and future shows and future information that I could give you. So let me know what other types of topics that you would like to hear about and let me know your ideas on this topic.

Give me some feedback as far as, “Hey, I had this.” Tell us about maybe your situation or a situation that you know of that power of attorneys helped and even in the past, how a Will or a trust helped out, or if you had a bad situation, let us know. But if you have a great situation that happened to you, let me know and then you never know. Someone else could be informed by what you say. And hopefully these informational videos that I’ve been putting out, they’ve been helpful to you.

And don’t forget to like and subscribe. So that helps the video that I’m doing now and the other ones to be more readily available for other people to see the video. It’ll pop up on YouTube and populate. Spread the word about the information you’ve gotten from the Protect Nest podcast. The more people that had the information, the better off the world will be.

Until next time, I’m Louisville estate planning attorney Brandon Lawrence. This has been Protect Your Nest. Let’s talk it over.