Financial Power of Attorney

A Power of Attorney (“POA”) is a written instrument by which one person, the principal, appoints another person or persons as his or her agent (sometimes referred to as an “attorney in fact”). The instrument grants authority to the agent to perform certain acts on behalf of the principal as set out in the instrument. The power of attorney creates an agency relationship and is an extremely valuable legal tool.

A Power of Attorney can be either a general POA or a special POA. A special POA limits the agent’s authority to one or more specific transactions. It is frequently used where the principal will be absent for a period of time and a specific transaction, like the sale or purchase of a home or the filing of a tax return, must be completed in the principal’s absence. Special POAs often have a limited life and have an expiration date in the document.

A general POA grants the agent the authority to perform any act that the principal may delegate to an agent. General POAs are frequently used in estate planning and elder law.

The North Carolina General Statutes contain a “short form” power of attorney that lists the categories of tasks for which the agent is authorized to act on behalf of the principal. That short form list refers to a more complete statutory listing of what those terms mean. It is very important that if a short form power of attorney is used that the powers it grants be understood and that it be executed very carefully.

Under the common law, an agency relationship like a POA terminated on the principal’s death or incapacity. Since 1954, all fifty states and the District of Columbia have adopted statutes that permit a principal to create a power of attorney that survives the principal’s incapacity. A power of attorney that survives the principal’s incapacity is a “Durable” Power of Attorney. To create a Durable Power of Attorney in North Carolina, the power of attorney must be in writing and contain words that show the principal’s intent that it survive his incapacity.

The feature of “durability” is critical where it is planned for the Power of Attorney to serve to permit a family member, friend or professional manager to act on the principal’s behalf during a long-term incapacity or dementia. In many cases, a durable power of attorney can serve to avoid the need for court proceedings and the imposition of a guardianship. This saves hundreds of dollars of the principal’s assets and uses the authority of a power of attorney that was crafted especially to serve the needs of the principal’s incapacity and long-term care planning.

Since a power of attorney is a grant of authority, only those powers specifically granted are authorized by the law. This particularly applies to “gifting” or transferring assets. Please be cautious when considering the use of a form power of attorney; thought must be given to your goals and priorities, your needs as your capacity wanes, and whether the document specifically authorizes actions that will later be important to your care and to honoring your financial goals and priorities.