Estate Planning Academy Episode 8: Power of Attorney
Terms & Definitions for Power of Attorney
- Attorney-in-Fact or Agent: The person you choose to make decisions for you
- Incapacitated: Unable to make reasoned, rational decisions for yourself regarding legal, financial, or healthcare choices as compared to a reasonable average person. Unable to manage day-to-day affairs or unable to take care of themselves or their property.
- Incompetent: Same as incapacitated
Types of Powers of Attorney
There are many types of powers of attorney, but they can be divided into big groups. Then it’s like a ala carte menu. Take one from column a and one item from column b.
Durable v. Non-Durable
- Durable stays in power if you are incapacitated
- Non-durable goes out of power if you are incapacitated
- If you create a non-durable power of attorney and develop dementia, Alzheimer’s disease, or become incapacitated in any other way, it stops working
Immediate & Springing
- Immediate goes into power as soon as signed and doesn’t require a doctor to declare you incompetent
- Springing goes into power when some condition happens, usually incapacity, but can be other conditions. For example, “While I am out of the country, this power of attorney is in affect.”
- If your power of attorney doesn’t have any conditions, then it is usually immediate.
Temporary and Permanent
- You can make a power of attorney permanent or add conditions that make it end, making it temporary
- For example “This power of attorney expires at midnight on December 31, 2018,” Or “This power of attorney expires if I divorce.”
Limited and Less-Limited
- A power of attorney can be for a limited purpose
- For example, “This power of attorney is to be used by my husband to sign for our new house.”
- A power of attorney can be for unlimited purposes
- Usually a power of attorney has a few limits
- Can’t change your estate plan
- Can’t change beneficiaries on accounts
- Can’t trade on margin
Arkansas Power of Attorney Statute
§ 28-68-104 – Power of Attorney is Durable
A power of attorney created under this chapter is durable unless it expressly provides that it is terminated by the incapacity of the principal.
That is, a power of attorney in Arkansas is durable by default and doesn’t have to say it in the text. However, it is best that a power of attorney say that it is durable or not in the text of the document. If you say that it is durable, almost all, if not all, states will recognize it as a durable power of attorney
- You need to know, like, and trust the person or people you choose to act on your behalf
- They will have broad, sweeping powers
Other Things to Know About a Power of Attorney
- You must be mentally competent when you sign. The level of competence required is that to understand and sign a contract.
- Springing powers of attorney still require a doctor to declare you incompetent in most cases. There is a way to reverse the conditions, and make it to where you can be declared incompetent by your family, then you can rebuke it with a single doctor’s report. Not many people would agree to go to a doctor to have their capacity tested, knowing the consequences.
- Powers of Attorney only provide lifetime protection