A power of attorney is an agreement between two people. One person (principal) signs a document granting power to another person (agent) to act on the principal’s behalf. The agent-in-fact acts as the executor of the principal’s wishes. The agent is able to make decisions on their behalf. In this article, we will address when a power of attorney expires and what types of powers of attorney there are.
What is the Power of Attorney?
A power of attorney is a legal confirmation or authorization that allows one person to act on behalf of another person in personal, business, and health matters. The power of attorney must be confirmed in an official document or letter of some sort that was signed and notarized. With this document, the person who has power of attorney can represent the principal in most financial, business, and personal matters. The power of attorney does not permit the person to represent the principal in court.
Depending on the details of the agreement, the person may have the power to make important decisions about the principal’s property, assets, finances, business, and even life. As such, if the principal is in critical condition and cannot make decisions for themselves anymore, the person with the “power of attorney for healthcare” can decide on the medical care the principal will receive (if it was so stated in the contract, of course). These special health-related powers of attorney are referred to as Durable Powers of Attorney or Living Wills. Most of the time, a power of attorney is used when the principal cannot be physically present to make decisions or sign documents.
Keep on reading to find out about the different types of power of attorney.
Main Types of Power of Attorney
Different types of powers of attorney may allow the attorney-in-fact to make decisions in different spheres of the principal’s life. While some may give you the limited power to sign one document or make one transaction on the person’s behalf, others may allow the agent to control the person’s medical care, property, and finances. Here are the main types of power of attorney:
General power of attorney gives the agent the right to act on behalf of the principal in all matters except healthcare. They can open bank accounts, make transactions, buy or sell assets, and more. The contract will stay in effect for as long as the principal is alive, or until they choose to terminate it.
Limited power of attorney is limited to a certain activity or area of life. The exact scope of activities should be outlined in the agreement. For example, the agent may be allowed to manipulate one particular property belonging to the principal. That may involve selling it, renting it out, reconstructing it, and more. Similarly, the agent may only have the right to sell the property according to the guidelines outlined in the power of attorney document.
The act of appointing a power of attorney (POA) is a significant and legally binding expression of trust between two or more individua...
In this case, the agent can and should continue to act on behalf of the principal in the case of the principal’s incapacitation. Usually, such contracts are signed with the expectation that the principal will not be able to take care of their own affairs and will need someone to do it for them.
When Does a Power of Attorney Terminate?
There are several reasons for ending a power of attorney. Certain circumstances can cause that to happen or prevent it from happening. Here are some of the most common ones that will help you to understand when does a power of attorney expire:
The principal dies
The principal’s death is one of the most common causes of the termination of a power of attorney. The termination date should coincide with the date of the principal’s death, however, that’s not always the case. In some circumstances, the agent may continue to act on behalf of the principal for a short time after their passing. Any actions taken by the agent before learning about the death of the principal will also be considered legally binding as long as they were done with the principal’s best interest at heart.
The principal becomes incapacitated
The general power of attorney is valid by law for as long as the principal can guide the decisions of the agent. As soon as they become unable to make decisions, the authority of the agent should no longer be recognized. There are exceptions to that as well, of course. As such, if the power of attorney is durable, the agent may continue to make decisions on behalf of the principal. As with the principal’s passing, any decisions made in good faith before learning about the incapacitation will hold up in court.
Purpose of the power of attorney is accomplished
This applies in a case when the power of attorney was granted to complete a specific task. For example, let’s say the agent’s responsibilities and financial power were limited to selling a piece of the principal’s real estate. Once the task is complete, the sale contracts have been signed, the bills have been paid, and the agent no longer has a task remaining, the POA is automatically terminated. The scope of the agent’s obligations will always be outlined in the POA document.
POA is revoked by the principal
The principal has the right to revoke the power of attorney at any point. If they choose to do so, they need to write a formal letter informing the agent-in-fact about their decision to revoke their power of attorney. This process is relatively easy and quick. If the principal has a legal guardian, they can deliver the official notice on their behalf.
POA has a termination date
Some powers of attorney contracts have a time limit. It’s rarer than you may think, but it happens. If that’s the case, the power of attorney ends automatically as soon as that day comes.
The agent and principal divorce
This, of course, works only if the agent and the principal were in a legal marriage relationship. When they decide to terminate their partnership by means of getting a divorce, the agent loses their power of attorney. There is an exception to that rule, and that is only if the contract states that the power of attorney is not affected by divorce.
Other reasons for the termination of power of attorney may be:
- The agent’s death;
- The agent’s incapacitation; or
- The agent’s retirement.
What Happens to Power of Attorney After Death?
You might be wondering, “Does the power of attorney end at death?” The short answer is yes, though there are exceptions to every rule. As we already know, the power of attorney automatically terminates if the principal dies. A power of attorney cannot survive beyond the time the agent becomes aware of the principal’s death. Once the principal dies, only the executor of their estate may act on the behalf of the deceased’s estate and beneficiaries. It is the executor’s duty to get in touch with all the beneficiaries and the probate litigation lawyer in the settling of the will of the decedent.
If, on the other hand, it is the agent-in-fact who passes away, when does power of attorney end? The answer is immediate. Unless the contract provides a backup or successor power of attorney to replace the one that passed away, the contract is automatically terminated.
To prevent any potential issues, it’s recommended to always have a legally binding will. You can find template in your state, for instance, Will Template Illinois, and get your ready-to-go will in a few clicks.
To summarize the article, here are some things you need to remember about POA and its termination:
- A power of attorney is a legal agreement between two parties where the agent is authorized to and agrees to act on behalf of the principal.
- Unless stated otherwise, the principal has to be capable of communicating clearly with the agent, except for durable powers of attorney
- If the two are no longer able to communicate or the agent is unable to act in good faith, the agreement is terminated.