Most of us don’t spend our lives worrying about what would happen if we suddenly got sick or had an accident. But if the past few years have taught us anything, it is that life can change in an instant – and that it pays to be prepared. One way to do so is by putting together a comprehensive estate plan.

A vital component of any estate plan is a power of attorney (POA). These legal documents allow you to designate a person to act as your agent if you are incapacitated or otherwise unavailable. There are two main types of powers of attorneys in California: medical and financial. Having both types of POAs can protect your interests and ensure that your wishes are followed even if you cannot make decisions for yourself.

At Daryl Reese Law, we offer a range of estate planning services to clients throughout California. For each individual and family, we work hand-in-hand with you to understand your goals and how we can help you accomplish them. If you’d like to get a head start in planning for your future, reach out to our law office today.

What Is a Power of Attorney?

A power of attorney is a relatively simple legal document that allows one person to act on behalf of another person to make financial, business, legal or other decisions. A person who is designated in a power of attorney or a similar document is often called an “attorney-in-fact” or an “agent.” In most cases, an individual appoints a family member or other trusted person to serve as their agent.

While you are not required to have a power of attorney, these documents can be incredibly helpful in many different ways. Most people think of powers of attorney as something that is used in the event of an emergency, such as an Advance Health Care Directive that allows an agent to make medical decisions if the individual is incapacitated. However, they can be used for any number of reasons.

For example, an individual who regularly travels for business might draft a power of attorney that gives their attorney-in-fact the power to pay their bills or even conduct real estate transactions on their behalf. You can even create a limited power of attorney that gives someone the power to make parental decisions for your children while you are out of town or otherwise unavailable. 

How a POA Can Be Used

There are two primary types of powers of attorney in California. First, a medical power of attorney involves designating an agent to make healthcare decisions on your behalf. In California, it is known as an Advance Health Care Directive.

Second, a financial power of attorney allows someone to handle financial and business decisions on your behalf. These documents can be used for a variety of purposes, such as:

  • Paying bills
  • Handling tax matters
  • Conducting real estate transactions

The idea of giving another person this type of control over your healthcare or finances may seem scary – and it can be. Yet there are many good reasons to have a power of attorney, including convenience. It is also critical to have powers of attorney in place to prepare for situations where you may not be able to act on your own behalf, such as an accident, illness, or incapacity.

Importantly, there are limitations on an agent’s authority to act under a POA. A power of attorney can be written in such a way that it only comes into effect when necessary and that the agent’s authority ends at a specified time. A skilled estate planning attorney can help you create a tightly-worded POA that meets your needs.

California law also requires that an attorney-in-fact act in the principal’s best interests. If they violate their fiduciary duty in some way (such as by signing over a valuable piece of real estate to themselves), then they could be held liable for any damages. In addition, an agent cannot change the principal’s will, transfer the POA to another person, or make decisions after the principal’s death.

Laws that Govern POAs in California

Both AHCDs and other types of powers of attorney are governed by the California Probate Code. These laws set out the basics of creating, modifying, and revoking a power of attorney. In addition, the California Civil Code defines mental capacity, which is necessary to create a power of attorney.

There are several legal requirements that must be met to have a valid power of attorney. As an initial matter, you must have the capacity to contract. At a minimum, this means that you should have the ability to manage financial resources, resist fraud, and resist undue influence. Similarly, the attorney-in-fact that you designate must also have mental capacity.

Next, once the document has been created, you must sign it. If you use a statutory form for a power of attorney, you must sign the document in the presence of a notary public. If you have a lawyer create a POA for you, then it can be witnessed by two people, notarized, or both witnessed and notarized. As a general rule, if your agent will need to present the POA to a financial institution or to conduct financial transactions, it should be notarized.

After the document has been signed, notarized, and/or witnessed, you should give a copy to your agent and store the original in a safe place. Depending on the purpose of the POA, you may also want to give a copy to the Office of County Clerk-Recorder (for real estate transactions) and/or to your financial institution.

Types of Powers of Attorney in California

In addition to the two main types of powers of attorney, there are several subtypes based on when the agent’s powers will come into effect and how long they will last. An experienced estate planning attorney can help you understand the difference between each type and which is best for your needs.

A general power of attorney gives your agent the same rights and powers that you have. When you sign a general power of attorney, your agent will have the right to sign legal documents on your behalf, pay all of your bills, and engage in financial transactions on your behalf. This is the broadest type of power of attorney, and will remain in effect until you rescind it or appoint a new attorney-in-fact.

By comparison, a special or limited power of attorney only allows your agent to make specific decisions for you. For example, if you are going on vacation and need someone to sign a deed for property on your behalf, you can draft a limited power of authority for that purpose and for that day. Your agent can only make decisions for you under a limited power of attorney within the scope of that document.

A durable power of attorney can either be limited or general. It will remain in effect if you become incapacitated in any way. If your power of attorney is not durable, then your agent’s authority to act on your behalf will end if you are incapacitated. Your loved ones will then have to petition a court to appoint a guardian or conservator for you to make decisions for you.

Finally, a springing power of attorney “springs” into effect when a specified event occurs. Most often, that event is incapacity. For example, you may have a springing durable power of attorney that only comes into effect when you become incapacitated. There are many other events that could be used, such as a military deployment.

It can be difficult to decide which subtype of power of attorney is right for you. Online forms and templates often don’t allow for nuance – and it is all too easy to make a mistake that could cost you a substantial amount of money. For this reason, you should always talk to a California estate planning lawyer before drafting and signing any power of attorney.

Why Should I Have a Power of Attorney?

There are many good reasons to have a power of attorney. Ideally, you will have at least two powers of attorney to cover both medical and financial decision-making.

As an initial matter, having a POA means that you get to choose who will make decisions for you, rather than letting a court pick for you. If you become incapacitated and don’t have a POA, then your relatives will have to go to court to get a guardianship and/or conservatorship. This can be an expensive, complicated legal proceeding that may ultimately lead to a court designating a person who you would never choose yourself.

In this way, a power of attorney allows you to plan for the future. We can’t predict what will happen to us, but we can get our affairs in order so that our loved ones are not burdened. Even if you are unable to make decisions for yourself about your medical treatment or your finances, a power of attorney can ensure that your affairs are still handled.

Having a power of attorney can also prevent questions about what you would want. We have all heard stories of lengthy court battles over a person’s intent after they become incapacitated. A well-drafted power of attorney can eliminate these issues by clearly spelling out exactly what you want.

A power of attorney can also smooth any number of processes, from asset protection planning to dealing with insurance and government agencies. For example, if it becomes necessary to apply for public benefits, your agent can do that for you. Similarly, if the insurance company is denying some part of your medical treatment, your attorney-in-fact can handle the claims and appeals process on your behalf.

Beyond incapacity, a power of attorney can be more convenient for everyone involved. There are times that we simply cannot attend to every aspect of our financial or legal lives. Designating an agent through a power of attorney can make certain aspects of your life easier.

Of course, the benefits of a power of attorney are based in part on how well the document is written. You want to make sure that you have chosen an agent who will act as a fiduciary on your behalf, and who only has the powers that you want them to have, when you want them to have those powers. A seasoned CA estate planning lawyer can help you achieve your goals and protect your interests.

Ready to Get Started? Reach Out Today.

Powers of attorney are one of the best ways that you can ensure that your affairs are handled no matter what may be going on in your life. Depending on your needs, a power of attorney can grant authority to an agent for a very specific matter for a short period of time or more broadly. Having the right powers of attorney in place is a fundamental part of any estate plan.

Daryl Reese Law is dedicated to crafting customized estate planning solutions for individuals and families in California. We treat each client with compassion and respect, creating a relationship of trust that allows us to make a thorough estate plan to meet your needs. To learn more or to schedule a consultation with a California estate planning attorney, give us a call at (707) 858-5000 or fill out our online contact form.

Resources:

Civil Code: https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV&sectionNum=39.