Legal Line: Power of Attorney, the most important document you may ever sign.
October 03, 2011

The above title may seem to be hyperbole, however, the significance and importance of a Power of Attorney is vastly understated.  A Power of Attorney is one of the most significant documents a person may ever sign, and contains provisions that are quite significant.

What is a Power of Attorney?  A Power of Attorney is a legal document, signed by a “Principal”, which authorizes a second person, the “Attorney-In-Fact”, to perform certain actions on the Principal’s behalf.   The Attorney-In-Fact does not have to be a licensed attorney, but is a person the Principal trusts to act on his or her behalf.  Most Powers of Attorney signed today are “durable” which means that they are effective immediately, and continue to be effective if the Principal becomes incapacitated. 

What powers does a Power of Attorney delegate?  The Power of Attorney is a very customizable document, and can be as comprehensive (or limited) as the Principal chooses.  However, most Powers of Attorney provide the Attorney-In-Fact with broad powers to conduct any transaction the Principal can perform.  The powers delegated are virtually endless, including the powers to make gifts, loan money, sign contracts, make withdrawals from deposit accounts, sign checks, and initiate or defend a lawsuit.    However, the Attorney-In-Fact is required to only perform these duties as the Principal’s fiduciary, and with the best interests of the Principal in mind.

Many Powers of Attorney also include the appointment of the Attorney-In-Fact as the Health-Care Representative for the Principal as well.  This means that the Attorney-In-Fact can make decisions regarding the Principal’s medical care and treatment (if the Principal is unable to make those decisions for him or herself). 

A third area where Power of Attorney can delegate significant powers is child care. A properly drafted Power of Attorney can designate an Attorney-In-Fact as the caregiver for minor children for up to one (1) year.  This provision would be very useful if a parent and child have to be separated for an extensive length of time.        

Why should I have a Power of Attorney?   A Power of Attorney is extremely useful when a Principal cannot act on his or her own behalf.  The most common reasons this occurs is because the Principal will be occupied with another task at the time they are needed, or because the Principal is not competent to authorize such a transaction on his own.  If an unavailable or incapacitated person does not have a Power of Attorney to assist them, significant complications can result.  These complications could then require litigation and a court to appoint a “Guardian” to act on the Principal’s behalf.   The costs of such a court appointment can be significant. 

Who do I choose as my Attorney-In-Fact?   A Power of Attorney grants significant power to the Attorney-In-Fact, and the Principal should trust the person they appoint completely.  For this reason, many people select their spouse to serve as their Attorney-In-Fact.    Another option would be to appoint two (2) people to serve as Attorney-In-Fact, but only allow them to act if they both authorize the decision.  The requirement that the Attorneys-In-Fact act together would make it less likely that the Attorneys-In-Fact will disregard the best interests of you, the Principal.   

How do I create or cancel a Power of Attorney?   A Power of Attorney is a legal document, and Indiana law requires that a Power of Attorney be drafted by an attorney, and witnessed in front of a notary public and at least one (1) witness.  The Attorney represents the Principal in such a transaction, and should discuss the various uses of the document when it is created.            

This article was written by Paul C. Rudolph, an attorney with Rudolph, Fine, Porter & Johnson, LLP in Evansville, Indiana.  For additional information, you can contact Paul at (812)422-9444. Paul is also a licensed CPA, and his practice areas include:  State and Federal Taxation, Estate Planning, Bankruptcy, and Corporate and Business Law.

This article is intended solely as an information source, and its contents should not be construed as legal or financial advice.  Readers should not act upon the information presented without qualified professional advice.