Power of Attorney – What is it? How can it be used?
The Durable Power of Attorney is a document which allows one individual (“grantee”) to act in the place of the principal (“grantor”) at the grantor’s requests based upon the specifics indicated within the document itself. This power, given to the grantee, persists despite the grantor’s subsequent disability or incapacity, or lapse of time, unless the instrument states to the contrary.
There are two types of durable powers of attorney – an immediate power of attorney and a springing power of attorney. The immediate power allows the grantee to act as the grantor would regardless of incapacity and is effective immediately upon execution of the document. The springing power, on the other hand, “springs” into effect upon a determination of the grantor’s actual incapacity. While most people would opt for the latter durable power, there are significant drawbacks to a power of attorney which is only in effect upon the determination of incapacity. One particular drawback is the manner in which incapacity is determined and the whether that conclusion is accepted by the third party relying on the document.
The major reason to execute a durable power of attorney is in situations where the need to manage property, finances, etc. requires immediate attention and the grantor of the power is unable to address those issues due to health related issues or incapacity. The benefit to the immediate power of attorney is that there is no outside need for a determination of incapacity to “spring” the power into action. The risk of that immediate power is that once this powerful document is transferred to the possession of the grantee, it is immediately in effect and usable.
In order to utilize a durable power of attorney, the grantee of the power can present themselves, as would the grantor of the power, and act without anything more than the physical document. The grantee of the power can sign checks and tax returns, enter into contracts, buy or sell real estate, deposit or withdraw funds, buy or sell securities, run the principal’s business, apply for public benefits and, in short, do just about anything the principal could have done as long as the powers are provided for within the language of the power of attorney.
Due to issues concerning the timeliness of the power and whether third parties were inclined to honor the document, the Massachusetts Uniform Probate Code upholds the use of a durable power of attorney notwithstanding the lapse of time since its execution and provides that a third party relying in good faith on a durable power of attorney will not be liable for action taken in such reliance.
The power of attorney is only revoked once that revocation is conveyed to the grantee of the power. With respect to third parties, relying in good faith upon the representation of the power of attorney, the grantor must give actual notice of the revocation to the third party. The grantee’s authority automatically terminates upon the death of the grantor.