One of the most common additions to a comprehensive estate plan is a power of attorney. In fact, people often execute more than one power of attorney over the course of a lifetime. While a POA can be a very useful legal tool it can also be potentially dangerous when in the wrong hands. Sadly, the elderly are often taken advantage of by unscrupulous individuals and POAs are often used to accomplish this. To protect yourself, or an elderly loved one, from being victimized it is important to have a thorough understanding of how a POA operates and when one terminates.
A power of attorney is a legal arrangement that allows you, as the principal, to designate an agent who will have the legal authority to act on your behalf. The extent and type of authority you give your agent will depend on the type of POA you execute. A limited POA only gives your designated agent specific powers. For example, you could give your adult child POA to access and withdraw funds from a specific bank or financial account. A general POA, on the other hand, gives your designated agent almost total control and authority over your assets. With a general POA your agent can do things such as sell your assets, withdraw funds from accounts, purchase assets, and even obligate you under a contract.
Knowing when and how your power of attorney terminates is another important thing to know before executing one. All POAs terminate upon the death of the principal. Traditionally, a POA terminated upon the incapacity of the principal; however, since that is often when a principal intends for a POA to work the law created the concept of a durable POA. A durable POA survives the incapacity of the principal. Individual state laws may vary; however, aside from the death of the principal some common reasons why a POA terminates include:
- Death of the principal
- The POA specifically provides a date for termination
- The POA specifies an event that causes it to terminate
- The purpose of the POA has been accomplished in the case of a limited POA
- The principal revokes the POA
- The agent dies or becomes incapacitated and the POA does not include a successor agent
As the principal you can revoke a POA at any time; however it is also important to know how or when your POA will terminate without revocation.
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