Sometimes circumstances can force us to give another person legal authority to make decisions or to act on our behalf. We may call on that person out of convenience or due to an emergency that renders us incapable of making important life decisions for ourselves. In these situations, the law permits us to execute a power of attorney (POA), which designates another person to act on our behalf to address financial, property, legal or medical issues.
What Is Power of Attorney in California?
Power of attorney is a legal relationship, governed by a written document, under which one person, called the principal, gives another person, known as the agent or attorney-in-fact, the authority to act on behalf of the principal, according to the terms set out in the power of attorney document.
A power of attorney can give an agent or attorney-in-fact authority over the principal’s property, finances, medical care or person. This authority can be broad or limited by the terms in the power of attorney document.
Powers of attorney are commonly used when a principal suffers a mental or physical disability and cannot make decisions, or when the principal cannot be present to execute legal documents or other transactions. An attorney-in-fact under a power of attorney can create a trust in California on behalf of the principal only if the power of attorney expressly grants that authority to the attorney-in-fact.
A power of attorney can last for a period of years, or be terminated upon the occurrence of an event such as the death of the principal, the principal’s revocation of the power of attorney, the court’s invalidation of a power of attorney, the divorce between a principal and their agent or attorney-in-fact, the resignation of the agent or the death or incapacity of the agent.
Powers of attorney also lapse when the principal becomes incapacitated, unless the power of attorney is designed to be a “durable” power of attorney. A principal may also execute a “springing” power of attorney that only comes into effect when the principal becomes incapacitated.
Powers of attorney come in many different forms, and you will want to consult with legal counsel to ensure that the document you execute is tailored to serve your legal interests and needs.
Understanding Types of Power of Attorney
Common types of power of attorney include:
- Durable power of attorney – A durable power of attorney in California grants the agent or attorney-in-fact control over certain of the principal’s legal, financial or property matters, as specified in the power of attorney. Unlike a traditional power of attorney, a durable power of attorney continues in effect even after the principal’s incapacity. This type of power of attorney is often intended for persons who are concerned about becoming incapacitated and want someone to manage their personal and financial affairs.
- Financial power of attorney – A financial power of attorney allows an agent to manage the business or financial affairs of the principal, including signing checks and contracts, filing tax returns or managing investments according to the principal’s wishes.
- Health care power of attorney – A standard power of attorney typically does not grant the agent authority to make medical decisions for the principal. A principal will need to execute a durable health care power of attorney, also known as a healthcare proxy. This document gives the agent or attorney-in-fact authority to oversee the principal’s medical care in the event of the principal’s incapacity.
- Limited power of attorney –A standard power of attorney grants the agent authority to act on behalf of the principal in all legal, property or financial matters. However, a principal may wish to give an agent authority over only a certain category of decisions. This can be accomplished by executing a limited power of attorney, which specifies the extent of the agent’s authority.
What to Consider When Designating Who Should Have Power of Attorney
Executing a power of attorney means granting someone significant authority over your affairs. You will want to choose the right person to assume these responsibilities. Factors you should consider when designating a power of attorney include:
- Trustworthiness – You will want to pick someone whom you can trust to follow through on your wishes and demands. You should ensure that your agent understands their duties and is committed to taking them seriously.
- Location – Your agent or attorney-in-fact may need to get to your location quickly in an emergency. Having someone make decisions on your behalf over the phone or by email may not prove to be the most efficient way to manage your affairs.
- Knowledge – If you are executing a financial power of attorney, you may want to choose someone with a basic understanding of finances or business. If you are executing a health care power of attorney, you may want someone with some understanding of medicine.
- Ability to collaborate and work with others – You may not be able to choose someone who is an expert in finance or business or medicine. If you cannot, make sure that your agent will work with, and listen to, the advice of experts such as financial advisors, attorneys or doctors.
Process for Setting up Power of Attorney
In California, the process of setting up a power of attorney begins with a determination of whether you need a power of attorney. You must then decide on the kind of power of attorney you need (e.g., durable power of attorney, financial power of attorney, health care power of attorney, etc.). You will also need to choose who will serve as your agent or attorney-in-fact.
So long as you are at least 18 years old and of sound mind, you can legally create a power of attorney. Under California law, a financial power of attorney must be executed by the principal either before a notary public or before two witnesses. If your financial power of attorney grants your agent the authority to make decisions about your real property, you should have your signature notarized so that your power of attorney can be recorded if necessary. A health care power of attorney in California must be signed by the principal in the presence of two witnesses, and those witnesses must also sign the document.
The person you name to serve as the agent cannot also serve as a witness. If you are executing a health care power of attorney, your health care provider, or an employee of your provider, cannot serve as a witness.
Must a Third Party Accept a Powers of Attorney?
Third parties, such as banks, insurance companies, transfer agents, attorneys and government entities, may be reluctant to accept a power of attorney. Often their concerns involve whether the power of attorney has been revoked or whether the agent or attorney-in-fact has the authority to act regarding the particular transaction. For the concerns of third parties that cannot be alleviated with the attorney drafted provisions of a power of attorney, an alternative may be seeking a court order confirming an agent’s authority, under California Probate Code § 4541.
Can You Revoke a Power of Attorney?
So long as you are of sound mind, you may choose to revoke a power of attorney, including a durable power of attorney, at any time. You are considered of sound mind so long as you understand the consequences of revoking the power of attorney.
It is considered best practice to revoke a power of attorney in a separate signed writing, with copies delivered to your agent and any other persons who may need to know of the revocation. It may also be possible to revoke a power of attorney by executing a new power of attorney whose terms expressly revoke all prior powers of attorney executed by you. You can also destroy the original power of attorney.
A conservator appointed on your behalf by the court may also revoke a power of attorney that you have executed. Finally, a court can also order a power of attorney revoked.
Talk to an Orinda Power of Attorney Lawyer Now
At Business Estate & Tax Attorneys, P.C., one of our Orinda lawyers can help you learn more about powers of attorney and set one up that is specifically designed to serve your individual needs. Call us today at (925) 271-4451 for a free consultation.