A power of attorney is an estate planning document that allows an individual to appoint a person to manage their financial and legal affairs if they are unable to do so. The person who drafts a power of attorney is called the principal, and the individual who is given authorization to manage legal and financial matters is called the principal’s agent or attorney-in-fact.
An Umbrella Term
“Power of attorney” is an umbrella term that is used to describe several types of legal documents, and choosing the right one is sometimes a confusing process. The most important decisions a principal will face is choosing whether their power of attorney should be durable or non-durable and whether it should go into effect immediately or when a triggering event occurs.
Durable and Non-Durable Powers of Attorney
A non-durable power of attorney will remain in effect as long as the principal is competent and able to relinquish control of their affairs. If the principal becomes mentally or physically incapacitated, their attorney-in-fact would no longer be authorized to act on their behalf. Most people include powers of attorney in their estate plans to prepare for just this situation, so they usually choose durable documents. A durable power of attorney will remain in effect even if the principal becomes incapacitated, and it only becomes ineffective if it is revoked or the principal passes away.
Springing and Non-Springing Powers of Attorney
Both durable and non-durable powers of attorney go into effect as soon as they are created unless their language includes a “springing” provision. Springing
powers of attorney sometimes go into effect on a specific date, but they are usually triggered by disability or incapacity. If you decide to include a springing power of attorney in your estate plan, you should make sure that the springing event is clearly defined. If vague language is used, the attorney-in-fact’s authority to act on your behalf could be challenged.
Medical Powers of Attorney
General powers of attorney authorize attorneys-in-fact to make bank transactions, manage investment portfolios and handle other financial matters. Medical powers of attorney authorize attorneys-in-fact to make important health care decisions. A medical power of attorney empowers the attorney-in-fact to decide what kind of treatment should be provided and when treatment should stop. The language of a medical power of attorney should meet requirements established by the Health Insurance Portability and Accountability Act. This 1996 federal law protects confidential patient information, and the sanctions for violating it can be harsh. If a medical power of attorney does not contain HIPPA language, doctors and hospitals may refuse to accept it.
Choosing an Attorney-in-Fact
When a power of attorney is drafted, the principal and the attorney-in-fact enter into a fiduciary relationship. This means that the attorney-in-fact is legally and ethically required to act responsibly, prudently and in the principal’s best interests. Attorneys-in-fact should be chosen with great care because they have broad powers and important responsibilities. If you include a power of attorney in your estate plan, you should choose an attorney-in-fact who is capable and trustworthy. You should also name one or more alternative attorneys-in-fact. These individuals could be called upon if the attorney-in-fact is unable to assume their duties. Failing to name alternative agents could lead to guardianship proceedings if the attorney-in-fact dies or becomes incapacitated.
Legal Help With a Power of Attorney
An estate plan should provide peace of mind, which is why so many people choose to draft springing powers of attorney that go into effect if they become incapacitated. An experienced New Jersey estate planning lawyer could help to draft a general or medical power of attorney that complies with New Jersey law
and contains language that meets HIPPA requirements. An attorney could also make sure that all relevant parties are notified if you decide to replace or revoke your power of attorney.
Choosing an attorney-in-fact is an important decision, and so is selecting a New Jersey estate planning lawyer who will work to make sure that your important documents are valid and legally enforceable. If you would like to learn more about powers of attorney or other estate planning matters, you can schedule a meeting with the Knee Law Firm at our Paramus, New Jersey office by calling (201) 996-1200.