How does power of attorney work?

On Behalf of | Oct 5, 2021 | Estate Planning

Many assume that an estate plan only involves drafting a will that determines who gets what. While a will is essential, there are other documents that form a complete plan and are extremely helpful to the individual (principal) and their family.

Two of those legal documents are a power of attorney (POA), which authorizes an individual (agent) to act on behalf of the principal, and a health care directive, sometimes called a living will. For the papers to be valid, the principal must be of sound mind when signing them. These are important because they allow a principal to choose who can represent them. Otherwise, a court could appoint a guardian, and a hospital could ignore a person who is not the spouse or child of the principal.

Common types of POAs

There are different kinds of POAs to fill various roles and have different limits, but the power is deemed durable here in Pennsylvania unless the document says otherwise. Pennsylvania has some specific requirements which must be met by both the principal and the agent for the POA to be enforceable All POAs expire automatically if the principal passes away.

  • General power of attorney: This enables the agent to act in the best interests of the grantor. This power ends when the grantor becomes incapacitated.
  • Durable power of attorney: This enables someone to step in and make decisions regarding personal matters. If it is written so that it is not effective until the grantor becomes incapacitated for a time or loses their ability to manage their affairs, it is called a springing POA that is also durable. Often the agent is the principal’s adult child, but it can be a trusted friend or companion, or even a hired representative.
  • Durable health care directive or power of attorney: This authorizes the health care agent to make medical decisions regarding the treatment and care of the principal when they become incapacitated. They are tasked with following and interpreting the predetermined health care treatment instructions, including initiating treatment, continuing treatment or withholding life-sustaining treatment.
  • Irrevocable power of attorney: As indicated, the principal cannot revoke this power once granted. To be irrevocable, the agent must have an interest in the subject of a POA. These are most often used in connection with loans or other financing transactions.
  • Special power of attorney: This limits the powers of attorney to a specific task such as selling property or trading stocks. It can also be drafted to expire on a specific date.

Requirements will vary

There are different sets of paperwork and guidelines for creating a valid power of attorney. Typically, the principal does this as a part of their initial estate planning, but it can be added or modified at any time until they become incapacitated. These agreements can be written with the Uniform Power of Attorney Act in mind, so they may be valid in more than one state.

Pennsylvania has specific requirements as to the number of witnesses and who can be a witness. The rules are complicated, so it is best to speak with an attorney here in Pennsylvania to address all guidelines and requirements if the principal lives or spends large amounts of time here.