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A Power of Attorney ("POA") is a document by which you
(the "Principal") give some other person (your
"Agent") the authority to do various things on your
behalf. A POA can be a helpful document to have. There are several
types; some POAs become effective at a date subsequent to the date
it is executed and others are effective only for a specified period
of time and/or only for certain specific purposes.
GENERAL: A general POA is one that allows your Agent to do
anything on your behalf, such as buying, selling or refinancing
your property, handling your investments or financial accounts,
making gifts (if the POA permits that), filing or settling legal
proceedings, preparing and filing tax returns, managing properties
or any other action which you normally would handle yourself. This
type of POA is recommended if you are disabled—or believe
you are or will soon be unable to handle your own
affairs—and is always recommended as part of your estate
planning.
LIMITED: This type of POA can be used to permit an Agent to do
only one thing (i.e., sell, purchase or refinance a piece of
property) or it can contain general powers as described above, but
be effective only for a specified period of time (i.e., if you are
out of the country on vacation for an extended period of
time).
MEDICAL: A medical POA permits your Agent to make certain
medical decisions on your behalf. This type should also be part of
your estate planning document package.
EFFECTIVE DATE: A POA can be effective as of the date it is
executed, or the ability of your Agent to act can be postponed
until such time as it is determined that you are unable to continue
handling your own affairs. In that case the POA is known as a
"Springing Power of Attorney".
EXPIRATION DATE: All POAs terminate upon your death. If
it's what's called a "durable" POA, however, it
stays in effect even if you become disabled or mentally
incompetent. You may, of course, at any time revoke any type of POA
by written notice to the Agent.
The Maryland legislature has recently adopted preferred forms of
statutory Powers of Attorney. Although these forms are somewhat
cumbersome, they are designed to protect you against an Agent who
may be less than scrupulous in handling your affairs. The statute
also provides that if a bank or brokerage firm, for example,
refuses to accept a duly executed statutory form of POA, that
entity is liable for reasonable attorney's fees and costs
incurred by you in any action taken to force that entity to accept
the form. Similar provisions were recently enacted by Virginia when
it adopted the Uniform Power of Attorney Act. In the past, many
banks or brokerage houses refused to recognize any POA forms except
their own.
There are also some technical rules in conjunction with the
execution of POAs, and Maryland, the District of Columbia and
Virginia each has its own requirements.
A Power of Attorney cannot be used by a trustee, personal
representative or executor of an estate or by corporate officers or
directors. Generally, in all other circumstances, a POA can be a
very valuable tool, BUT you must be very careful who you name as
your Agent. It must be someone you can trust to work for your best
interests, and you need to remember to whom you give your POA. That
will allow you to revoke it if, for example, you have appointed
your spouse as your Agent and you become divorced or if you
discover that the Agent you originally appointed may no longer be
trustworthy or may have died or become incompetent.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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