What’s the right power for your POA?

by Chris Markham. 0 Comments

I was in District Court a few months ago, and I saw something that always brings a smile to my face.

No, it wasnt a win (although that did occur in this instance). Rather, it happened during the traditional cattle call of defendants and plaintiffs; both sides being called up before the judge to state the subject matter of their respective cases and to determine how long their issues will take.

On numerous occasions, a representative from the defendants table stated that they were there in the place of said defendant. When the judge asked if they were an attorney, the reply was always the same No, but I have the defendants power of attorney. The judge then sent the person on their way, stating that a power of attorney just didnt make the grade.

Thus, I think its fair for a little refresher course on what a power of attorney is and what it isnt.

Basically, a power of attorney grants the holder the ability to manage a subjects life. The POA can manage bank accounts, investment accounts and real property, buy and sell stock and property, enter into leases and collect rents. A POA cant, as weve already learned, represent their subject in court. The POA also shouldnt be used for specific transactions, such as purchasing real property and making medical decisions. Whole different powers of attorney are needed for these matters.

One of the most important issues when entering into a power of attorney is to take into consideration when the POA will officially take place.

There are two options for this. The first is as soon as the document is signed, and the second is when the subject is no longer able to make decisions on their own. Of course, there are a few pros and cons to each route you may take. With the POA going hot right out of the box, your POA can begin to manage your life immediately, sometimes without you even knowing it.

I had a case a while back where the POA had been siphoning money from their subjects account for years. Then, upon the subjects death, the heirs found out that there was nothing left in the estate the POA had all of it. Tears, gnashing of teeth and threatened litigation was all a part of the drill. However, the POA can also assist you in some matters that you may need at this time, such as managing your accounts if you have to leave town on a long trip, or maintain your investment properties if you dont have the time.

With allowing the POA to take over, so to speak, when and if you become incapacitated, you save yourself some of the heartache showcased in the previously mentioned worst-case scenarios. This way, the POA will truly be there when you need it most, and, it likely shortens the time frame that a POA with some less than honorable intentions will be able to take advantage of you.

As I mentioned earlier, a POA isnt good for a few things other than trying to represent someone in court. A traditional scenario is when a person is going to be a party to a real estate transaction, but theyre going to be out of town on the day of settlement. They almost always ask me for a POA. However, that isnt the right choice.

For a real estate transaction involving a POA, the POA is filed with the deed in the local land records office. Eventually, youll get the document back, but it could be months.

Additionally, mortgage companies dont particularly care for POAs that allow the holder to do more than participate in a specific real estate transaction. They get a bit nervous, as the holder could then question all manner of things involved with the closing, including terms and conditions the original signatory agreed to.

Therefore, if youre going to use a power of attorney for a single real estate transaction, use one that only gives the holder the power to enter into that transaction. In this instance, the power of attorney gives the name of the individual who needs the power of attorney, the holder of the power of attorney and the address of the property involved in the transaction.

In the end, POAs are usually used as a catch-all for a few very powerful, yet very different documents. Knowing which one you need and what form it will take can save you a great deal of time and heartache in the end.

Christopher L. Markham is a general practice attorney based in Frederick. He can be reached at chris.markham7@gmail.com.

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