Why do you need a Power of Attorney?
In the state of California, you need a power of attorney in order for someone else to sign documents on your behalf or act as an agent to represent you. Typically, a person residing out of the country will need one if they own assets in California that have to be updated and maintained. In Contra Costa County, for example, I have helped many parents who live outside the U.S. give power attorney to their children to manage their homes in the SF East Bay.
The other main reason a citizen of California would need a power of attorney would be "just in case." Should you become incapacitated, or unable to make decisions (for reasons such as alzheimer's or dementia), a power of attorney appoints someone who can act on your behalf. Without one, family members must obtain a conservatorship, which is a costly and often lengthy legal process. With nearly 5.3 million Americans currently diagnosed with Alzheimer's, chances of this disease or another that inhibits mental capacity are not as low as one would think. I personally recommend all my clients in Contra Costa County and Alameda County have a power of attorney. Most estate planning lawyers in the SF East Bay will include this as part of the Estate Planning package.
So, let's go through the specifics of exactly what a power of attorney does.
1. A Power of Attorney is a legal document that allows an individual (who is called the principal) to designate someone to represent them (called the attorney-in-fact or agent).
2. A Power of Attorney grants power to the agent to handle a specific task, such as signing a sale document, or handle on-going tasks. In a properly drafted document, the powers granted to the agent are clearly spelled out in the Power of Attorney. Examples include:
- buying/selling property
- trading bonds/stocks
- paying bills
- making bank deposits and withdrawals
- filing tax returns
- signing contracts
- applying for Medi Cal or SSI
Can an agent change an existing Will, or execute a new Will on my behalf?
Probate Code Section 4264 specifies that an attorney-in-fact (agent) can form a trust on your behalf, but cannot change or execute a will.
Is an agent able to use my funds or assets for themselves?
No. It is illegal for an agent to gift themselves from your accounts. An agent who takes property from a principal over the age of 65 can also be convicted of Financial Elder Abuse.
Can I make a gift to my agent?
Yes, as long as you are mentally competent. For example, if you sign a Durable Power of Attorney, it will remain in effect even if you lose mental capacity. If you make a gift to an agent after you become incompetent, the agent can be held legally liable and can face prosecution for financial elder abuse. You can make a gift to your agent. However, if your Power of Attorney is a “Durable Power of Attorney,” i.e. one that remains in effect even if you become incompetent, a gift to your agent after you become incompetent may be restricted by law. This is because, if you are incompetent, it would be the agent who is deciding to make the gift of your property to himself/ herself. You may wish to speak to an Estate Planning lawyer before giving any gifts.
How safe is a Power of Attorney?
When an agent or attorney-in-fact is a trustworthy, organized, and responsible person, a Power of Attorney is a safe option. An experienced Estate Planning attorney can also refer you to a professional fiduciary, or someone who can professionally manage your assets and sensitive transactions. Professional fiduciaries also have the added benefit of being represented by attorneys, making them an extra safe option.
Is it possible to appoint multiple agents?
Yes. Multiple agents can be appointed who can work together to act on your behalf. Alternate agents can also be appointed, should something happen to the primary agent.
When will my Power of Attorney take effect?
The Power of Attorney goes into effect on a date decided by you. This could be immediately, 6 months in the future, or only if you lose the mental capacity to make your own financial decisions.
Once the Power of Attorney goes into effect, will I still have the ability to perform the tasks outlined on my own?
Yes, either you or your agent can perform the tasks/duties given by the Power of Attorney.
When does a Power of Attorney end?
A power of attorney can expire at a date chosen by you, or upon a task being completed by your agent. If you sign a "Durable Power of Attorney," it will last until you either die or cancel it.
How do I fill out a Power of Attorney?
For a simple power of attorney, you can fill out and file the form below. Make sure to carefully read all instructions that follow the form. If you have questions, concerns, or need an emergency Power of Attorney, call my office at 925-322-1763.
What is important to keep in mind when filling out a Power of Attorney?
A Power of Attorney has the ability to grant an agent access to your bank accounts, property, insurance, and all of your other personal financial accounts. As such, it is very important that you trust your agent completely, and that you understand the scope of the powers you are giving to them. For instance, if you need them to be able to make bank deposits on your behalf, but not withdraw money, make sure that your Power of Attorney clearly states this. Also, ask yourself if there are any alternatives to a Power of Attorney. Ask an experienced Estate Planning lawyer for advice if you have any questions. It is important to have a full and complete understanding of what a Power of Attorney is before signing anything.
How do I ensure my Power of Attorney is legally valid?
First, sign the Power of Attorney. Second, have it acknowledged by a notary public or witnessed by at least 2 adults, other than the agent.
What is a Durable Power of Attorney and how is it different than a regular Power of Attorney?
Durable power of attorney
Under California law, a power of attorney is ineffective when the grantor (or principal) dies or becomes "incapacitated." The law defines incapacitated as being unable to grant such powers due to mental illness or physical injury. However, if the principal specifies in their Power of Attorney that the document continue even after they become incapacitated, then the Power of Attorney will last until they die. This is called a "Durable Power of Attorney" or "power of attorney with durable provisions."
To be a legally valid Durable Power of Attorney, the following language should be included:
"This Power of Attorney shall not be affected by subsequent incapacity of the principal", or
"This Power of Attorney shall become effective upon the incapacity of the principal",
or similar words that demonstrate you want the document to be valid even if you become incapacitated.
Also, ensure that Your Power of Attorney complies with California Probate Code Section 4000 - Section 4065.
What happens if there is a dispute regarding a Power of Attorney?
The Power of Attorney can either be cancelled by the principal, or those who suspect a problem with a Power of Attorney can file a petition with the Probate Court requesting Court review of the agent's actions. The court may then decide to pursue further investigations.
As an Elder Law attorney in Walnut Creek, I have had more than a few cases in which a problem exists with a power of attorney. For example, in one of my current conservatorship cases, two Power of Attorneys were executed, one of which occurred after the principal may have been mentally incapacitated. Because of the ambiguous nature of the second document, a conservatorship needed to be established in place of the Power of Attorney.
Can a Power of Attorney be Changed or Cancelled?
A Power of Attorney must be cancelled in writing and a new Power of Attorney issued to any institutions (such as a bank) that held the old Power of Attorney.
What happens if the Agent has difficulty using the Power of Attorney?
An agent can file a petition with the Probate Court (located in Martinez for Contra Costa County, and Berkeley for Alameda County) asking for confirmation of the Power of Attorney. The probate court can also order institutions to honor the authority of the agents.