Giving someone authority to act on your behalf through a power of attorney is a major decision. The person who grants that authority is known as the principal or maker; the person getting the authority is known as the attorney-in-fact or agent. When this type of authority is given in a power of attorney, the principal does have the right to revoke that authority. There are specific requirements to revoke a power of attorney including the principal being of sound mind, the attorney-in-fact being notified, and that such notification is made in writing.
There are numerous reasons why someone would authorize another person to act on their behalf. Depending on the principal's state of residence, multiple types of powers of attorney may be required. The most common types of powers of attorney include the following:
As the principal will be trusting someone to make very important decisions on their behalf as attorney-in-fact, they should delegate the authority to someone they trust implicitly. It is recommended that the principal speaks with the person before drafting the power of attorney. In the event of a medical power of attorney, or a living will, the principal should ensure that the person has a full understanding of the care they wish to have, what end of life decisions they are most comfortable with, and any other important information. Once these limits have been discussed, the medical power of attorney should be very specific regarding the principal's wishes, including decisions such as organ donation. The principal should also share their wishes with their family members and medical team.
If the principal is designating someone to look after financial matters in the event they are unable to do so, it is important to make sure the person knows what financial accounts the principal has. This means providing their chosen attorney-in-fact with information pertaining to bank accounts, investment accounts, and any other financial accounts they may need to access to provide care. In general, it may be a good idea to contact the financial institutions and provide them with a copy of the power of attorney for their files.
A non-durable power of attorney is invalidated should the principal become incapacitated. This is an important distinction because most people execute a power of attorney for the specific purpose of protecting themselves in the event of incapacity. This predicament can be avoided through the use of a durable power of attorney. A non-durable power of attorney is commonly used for financial transactions in the event the principal is unable to be present. The document may expire upon the transaction being complete or it would automatically become void in the event of incapacitation or death.
Generally, there are certain times when the principal should consider reviewing the authority they have designated to their attorney-in-fact. Clearly, a new attorney-in-fact should be named if the original attorney-in-fact dies. Generally, it is a good idea to review a power of attorney on an annual basis in case the principal wishes to make any changes.
Another important time to review a power of attorney is if the principal has been diagnosed with a terminal illness. Remember, a power of attorney can only be altered or revoked while the principal is considered to be "of sound mind." If there is no power of attorney in place, the principal should take the opportunity to put one in place while they are still able to do so.
Other examples of when a power of attorney should be reviewed include if the principal gets married, divorced, changes their mind as to whom they wish to designate power, or if they decide there should be new limitations on the authority they have granted.
The principal of a power of attorney has the right to make changes to the terms of the power of attorney at any time. This means that they can change the authority they have granted, modify the start and end date of the authority, or change the person who has been granted power. In nearly all cases, this involves revoking the initial power of attorney. This is a legal matter and would require the principal to draft a new power of attorney (if desired), notify the current attorney-in-fact of the changes or revocation, and notify any parties who may be relying on the old power of attorney.
It is important to remember that each state may have specific requirements as to the proper legal process to revoke a power of attorney. However, in most cases, authority can be revoked if the principal is of sound mind, has notified the attorney-in-fact that they are revoking their authority, or if a new person has been named as attorney-in-fact. Regardless of the circumstances, special care should be taken to ensure the original attorney-in-fact is notified of the changes.
Revocation can be done in part or in full. For example, if there is a financial power of attorney in place that provides broad power to a third party, the principal may wish to restrict what the attorney-in-fact is able to do. The principal could specify that their attorney-in-fact is only able to pay bills, therefore withholding authorization to open or closed accounts. They may also have additional authority to purchase and sell real estate or securities. The important thing to be aware of is that the principal has complete control as long as the original documents do not restrict them from doing so and that they are in control of their mental faculties.
Once a power of attorney has been revoked, or the terms have been modified, the principal should ensure that there is no way for their attorney-in-fact to act on their behalf. If it becomes apparent that the attorney-in-fact has used the authority to accept actions on the principal's behalf, they should be notified in writing that the power of attorney has been revoked. For example, if the attorney-in-fact wrote checks from the principal's checking account, transferred securities from the principal's brokerage account, or had bills transferred from the principal's mailing address to their own, the proper steps will need to be taken to ensure the appropriate parties are notified of the change.
A power of attorney can be a powerful estate planning tool and can help you to prepare for the unexpected. Without a power of attorney in place, should you be injured in an accident and are unable to communicate, there is no way for your loved ones to access the funds that may be necessary to provide for your care. In addition, your loved ones may be unable to communicate your wishes for your medical care unless you have taken the necessary steps to put a medical power of attorney in place.