• What is a power of attorney?
    • A power of attorney is a document that grants legal rights and powers by one person (called the “principal”) to another person (called the “agent” or “attorney-in-fact”). The agent acts on behalf of the principal for legal, financial and business matters. The agent can do whatever the principal may do, as defined in the power of attorney document, such as withdraw funds from bank accounts, trade stock, pay bills and cash checks.
  • What makes a power of attorney “durable”?
    • In general, a power of attorney expires if the principal becomes mentally incompetent. However, it is often useful for an individual to be able to appoint someone to act for him or her when the individual is no longer able to make decisions or handle his or her affairs. Therefore Massachusetts law permits individuals to create a “durable” power of attorney which continues in effect after the individual loses competence.
  • When does the power of attorney take effect?
    • The power of attorney takes effect as soon as it is signed by the principal unless it is “springing.” A “springing” power of attorney takes effect only when the event described in the power of attorney document itself takes place. Typically this is when the principal has been certified by one or more physicians as incapacitated, meaning they can no longer act on their own behalf.
  • Does the power of attorney take away a principal’s rights?
    • No. Only a court can take away a principal’s rights in a conservatorship or guardianship proceeding.
  • Can the principal change his or her mind?
    • Yes. A principal may revoke a power of attorney at any time. All a principal needs to do is send a letter to his or her agent telling them that their appointment has been revoked. From the moment the agent receives the letter, he or she can no longer act under the power of attorney.
  • Can an agent be held liable for his or her actions?
    • Yes, but only if he or she acts with willful misconduct or gross negligence.
  • Can an agent be compensated for his or her work?
    • Yes, if the principal has agreed to pay the agent. In general, the agent is entitled to “reasonable” compensation for his or her services. However, in most cases, the agent is a family member and does not expect to be paid. If an agent would like to be paid, it is best that he or she discuss this with the principal, agree on a reasonable rate of payment, and put that agreement in writing. That is the only way to avoid misunderstandings in the future.
  • What if there is more than one agent?
    • Depending on the wording of the power of attorney, you may or may not have to act together on all transactions. In most cases, when there are multiple agents they are appointed “severally,” meaning that they can each act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent.
  • Can the agent be fired?
    • Yes. The principal may revoke the power of attorney at any time. All he or she needs to do is send the agent a letter to this effect. The appointment of a conservator or guardian does not immediately revoke the power of attorney. But the conservator or guardian, like the principal, has the power to revoke the power of attorney.
  • What kind of records should the agent keep?
    • It is very important for the agent to keep good records of his or her actions under the power of attorney. That is the bet way to be able to answer any questions anyone may raise. The most important rule to keep in mind is not to mix the funds the agent is managing with his or her own money. Keep the accounts separate. The easiest way to keep records is to run all funds through a checking account. The checks will act as receipts and the checkbook register as a running account.

The information provided here is a summary only and does not take into account your individual situation. Please contact me at North Shore Elder Law & Estate Planning to learn more about durable powers of attorney.