A Power of Attorney is a document used to appoint someone to act in the place of someone else. The person that executes the Power of Attorney is called the principal and the person or entity that they appoint to act for them is their agent or Attorney-in-Fact. A Power of Attorney can be used to give someone authority to do many different things including the following:
- Make gifts
- Create or change beneficiaries of certain types of assets
- Waive a person’s right to receive property
- File, pursue or settle a lawsuit
- Collect or pay debts
- Make and enforce contracts
- Demand, buy, lease, sell or otherwise manage real estate
- Demand, buy, receive, or otherwise manage personal property, stocks, bonds, commodities, options
- Deal with financial institutions like banks and insurance companies
- Operate a business
- Manage retirement plans
- Pay taxes
In short, a Power of Attorney allows someone to appoint someone else the authority to act on their behalf in managing property and financial affairs. It is important to understand what a Power of Attorney is not. A Power of Attorney cannot be used to manage assets after the principal’s death because a Power of Attorney becomes ineffective when the principal dies. In addition, a Power of Attorney cannot appoint an executor or otherwise act as a Will. In addition, the statute that creates Powers of Attorney lists what authority the principal can and cannot grant to their agent. If the authority that is granted to an agent is not listed in the statute, then the agent does not have a right to exercise it. For example, a Power of Attorney cannot be used to vote in someone’s place or to agree to a marriage or divorce. General Powers of Attorney are meant to be used to manage assets and engage in financial dealings.
Powers of Attorney are usually effective as soon as they are executed unless they specify some triggering event that makes them effective and Durable Powers of Attorney are effective after the principal becomes incapacitated. As a result, care must be taken to make sure the agent understands what role they are supposed to play for the principal.
Out of state Powers of Attorney are generally valid in North Carolina. They need only comply with the laws of their home state or with the laws of the state of North Carolina, so it is not always necessary to update a Power of Attorney when moving to a new state.
You can terminate a Power of Attorney several ways including filing a revocation with the Register of Deeds and destroying the document. For those that have made their spouse their agent, it is important to note that a Power of Attorney becomes ineffective if the principal and agent get divorced unless the document states otherwise.
Furthermore, the agent is not free to do whatever they wish with the Power of Attorney. Regardless of what the Power of Attorney document states, the agent has a duty to do the following under North Carolina law:
- Act in accordance with the principal’s “reasonable expectations”
- Act in good faith
- Act only within the scope of authority granted by the Power of Attorney
Unless the document says otherwise, the agent also has duties to do the following:
- Act “loyally for the principal’s benefit”
- Avoid a conflict of interest
- Use ordinary care, competence, and diligence exercised by others in similar circumstances
- Keep records and receipts
- Cooperate with other agents, including health care agents
- Attempt to preserve the principal’s estate plan
As a result, acting on a Power of Attorney is a large responsibility and should not be taken lightly. Actions taken in “good faith” are generally not subject to challenge, but if the agent violates one or more of the above duties, then they can be personally liable for their conduct.
There is a lot to know about Powers of Attorney, how they operate and their limitations – more than can be summarized in this article. Learning the form that was available for free on the internet is not going to function the way you need it to can be an unpleasant experience depending on the circumstances. Contact the Humphries Law Firm to schedule an appointment to discuss how a Power of Attorney can be used to accomplish your needs.