What is Power of Attorney?

Power of attorney is when an individual becomes responsible for another person's financial and / or personal affairs. Essentially, when someone has power of attorney for another person, they are responsible for making any life decisions for the person who has appointed them in the power of attorney position. The person making the appointment is usually referred to as the 'principal' or 'granter', while the person who undertakes the responsibility is referred to as an 'attorney-in-fact'.

The usage of 'attorney-in-fact' is used so as to differentiate between someone acting with power of attorney and a legally qualified attorney; the latter will be referred to as an attorney at law. To be an attorney-in-fact, one requires no legal qualifications whatsoever and the process of transferring attorney to said person is a civil rather than legal decision.

Undertaking power of attorney is not an easy decision to make, as it essentially makes one responsible for the decisions and choices of another. Power of attorney is usually transferred when the principal is unable, or is becoming unable, to make important decisions for themselves; usually due to mental illness, though those suffering from terminal illness often transfer control of their affairs. However, while such instances make up the vast majority of cases of power of attorney, any person for any reason can be granted or give power of attorney.

What exactly the attorney-in-fact is responsible is dependent on the type of attorney granted, though the most common is for power of attorney over financial affairs to be granted. The attorney-in-fact becomes a fiduciary of the principal; a fiduciary meaning a legal relationship that is based on trust. On this basis, the attorney-in-fact is required to be truthful with the principal at all times in how their affairs are being handled.

Granting power of attorney is not a difficult process. Oral power of attorney is recognized by courts, even if it is not officially witnessed, and is given the same powers as a written power of attorney would be. However, for an organization such as a bank or hospital to recognize a power of attorney and refer all decisions to the attorney-in-fact, the decision will usually need to be made in writing and be correctly witnessed. This will require signatures from both the principal and the attorney-in-fact, agreeing to the transfer of power to the attorney-at-law.

In some cases, this is not always possible; for example, if an individual suffers a serious accident, they may not be able to make decisions for themselves but may also not be fit to sign or voice a transfer of power. This is known as 'springing power of attorney', and proof of the incapacity of the principal must be obtained before it is recognized By law, no one can obtain springing power of attorney before any incident or accident; it must be done when the principal is incapacitated, and never before.

However, if a mental health patient is well but knows they will deteriorate to the point where they cannot make decisions for themselves any longer, there is a solution beyond springing power of attorney. The principal can prepare a Psychiatric Advance Directive, whereby the power of attorney is transferred at a certain point when their mental health deteriorates. In the mean time, the principal retains control of their financial affairs.

Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.