Part 2: Rocket Lawyer Documents

Power of Attorney

• An Overview
  Provides a brief description of the document, reasons to create or update the document, and a list of information you’ll need before you begin the document.
• A Document Interview
  Identifies possible interview questions you may be asked with specific legal information for each question.
• Signing Instructions
  Summarizes important information on who must sign the document, who can be a witness to the particular document, and if the document needs to be notarized.

POWER OF ATTORNEY

In this document, you authorize another person or organization to act on your behalf in a variety of financial and legal situations.

Reasons to Create

• Provide authority for someone to act temporarily on your behalf in your absence.
• Provide authority for someone to act on your behalf in case you become incapacitated.

Before You Begin

Information you may need:

• Your name and address.
• Name and address of the Agent, (the person who will be given authority to act on behalf of the Principal).
• Name and address of the successor Agent, (an alternate person who will be given authority to act on behalf of the Principal, if the first Agent is unable to act as the Agent).
• Complete legal description of any real estate over which the Agent will have power.

Reasons to Update

• A change in your level of trust in the Agent.
• The death or incapacity of the Agent.
• A desire to change the powers granted to the Agent.

DOCUMENT INTERVIEW

Who is this document being created for?

A Power of Attorney is a document under which you as the "Principal" authorize another person or entity (an "Attorney-in-Fact" or "Agent") to act on your behalf. You sign a Power of Attorney document so that your Agent will be able to handle your affairs during a period of time when you are unavailable or unable to do so. An Agent is not required to be a lawyer.

A Power of Attorney may be either general or specific. A General Power of Attorney gives the Agent broad authority to act for you. A Special Power of Attorney grants the Agent limited authority to act only in specified situations. In addition, a Power of Attorney may be durable. That means it remains in effect even if you become incompetent or incapable of handling your affairs. If you do not want it to remain in effect, then the document can be made "non-durable."

Where will this document be signed?

Notarized Signatures

The place where the Power of Attorney document will be signed is important in determining which state's laws will govern. The document is generally signed in the state in which the Principal resides, so that that state's laws will govern the Power of Attorney document and any issues that might arise under it. Depending on the state in which the document is signed, it may be necessary that the document be signed in the presence of witnesses. In all states the signatures on the Power of Attorney should be notarized. In addition, some states require that the name of the person who prepared the Power of Attorney document be included in the document in order for the document to be recorded with the appropriate governmental office.

Who will be appointed as Agent to act on your behalf?

Choosing an Agent

An Agent, sometimes referred to as an Attorney-in-Fact, does not have to be an attorney. The Agent can be any adult that you trust and who is competent to handle your affairs. An Agent can also be someone other than an individual, for example, a bank. Whoever you choose as your Agent, it is important that you first discuss the issue with your potential agent and express your values and wishes with regard to how your affairs should be handled. This also gives the Agent an opportunity to consider and communicate to you whether he or she is willing and able to handle the responsibilities.

Agent Powers Over a Living Trust

If you have a living trust, the trustee of that trust is typically the person who controls all disbursements from the trust assets. If you serve as the trustee and later become unable or unwilling to continue acting as trustee, the successor trustee assumes those responsibilities. If for unusual reasons you want to provide the agent under your power of attorney with the authority to amend or revoke the trust, or with the authority to require the trustee to make certain distributions from the trust, you should consult an attorney. The powers granted under this power of attorney document may not provide the agent with that authority.

Agent Provisions

Generally, an Agent is not liable for damages unless he or she intentionally engages in misconduct. This protection is designed to encourage Agents to accept the responsibility of being an Agent. In order to ensure that the Agent is carrying out his or her duties in a responsible manner, it may be helpful to require the Agent to provide periodic accountings (usually annually). This requires the Agent to provide detailed reports of all actions taken during the period, including amounts of funds that have been paid or received and any property that has been sold or acquired.

Do you want to appoint a person to serve as Agent if your first choice can’t serve?

Successor Agent

A successor Agent is someone who is appointed to serve as Agent if your original Agent becomes unable or unwilling to serve any longer. The successor Agent takes over all of the duties of your original Agent, and the original Agent is relieved of all obligations and powers. It is a good idea to name a successor Agent in case your Agent dies or becomes disabled and you are no longer competent to name a new Agent. In such a situation, you would no longer have the power to appoint a new Agent and it might be necessary for a court to appoint someone for you.

Do you want to revoke any prior power of attorney documents?

Revoking Prior Power of Attorney Documents

When the reasons for granting a Power of Attorney change, it may be necessary to revoke the powers granted. A Revocation of Power of Attorney is a document under which you revoke a Power of Attorney, whether general or special, that previously authorized an Agent to act on your behalf. Prior Power of Attorney documents may also be revoked by including a revocation provision in a newly executed Power of Attorney document. In either case, a copy of the Revocation MUST be presented to the Agent as evidence of your intent to revoke the Power of Attorney. If you choose to revoke prior Power of Attorney documents, you should be careful to make sure that any Power of Attorney documents related to health care are not revoked inadvertently. This can be done by stating specifically in the document that they will remain in effect.

Would you like your agent to act on your behalf in all situations or only in specific situations?

General vs. Special

A General Power of Attorney is a document under which you authorize another person to act on your behalf in a variety of situations. In contrast, a Special Power of Attorney is a document under which you authorize another person to act on your behalf in specific situations only.

A general power of attorney is very broad and provides extensive powers. A general statement is included which gives the Agent "full power and authority" to act on your behalf. The document then lists certain powers to make it clear that you intended to grant such broad powers.

A Special Power of Attorney document provides the Agent with only those powers that are listed in the document.

Interpretation of the Power of Attorney

The intent of a General Power of Attorney is to permit the Agent to take any action on behalf of the Principal; the listing of specific powers should not be interpreted as meaning that the Agent's powers are limited only to the listed powers. On the other hand, a Special Power of Attorney should be interpreted as allowing an Agent full authority with respect to only the powers as listed in the document.

Will your Agent be authorized to hire professionals?

Hiring Business Professionals

It may be advisable to authorize your Agent to hire business professionals to assist him or her in managing your affairs. For example, your Agent may need to hire accountants to review and manage the business records of a business owned by you, or the Agent may need to hire a real estate agent to assist in the sale or purchase of property. This authority allows the Agent to carry out your affairs more efficiently. However, it is important to remember that any business professionals hired by your Agent will be paid out of your assets.

Will your Agent be authorized to manage any business that you own?

Business Afairs - General Power of Attorney

If you own one or more businesses, you may want to give your Agent the authority to manage and operate those businesses. For example, this would allow the Agent to pay employee salaries, pay payroll taxes, pay creditors, order inventory, and manage the day-to-day operations of the business. This full grant of authority would also give the Agent the power to sell, dissolve or close the business if the Agent deems it appropriate or necessary.

What residence of yours may your Agent mortgage or sell?

Homestead

The term "homestead" means the property that you own and maintain as your personal residence. The exact definition of homestead varies from state to state, but generally includes the dwelling place and the related land. In most cases, the amount of land that can be included as part of the homestead is limited. In some instances, the amount of land may be limited to a "lot," but in other cases the amount may be as much as 40 acres. The term "homestead" can also include a condominium or similar type of real estate interest. An apartment that is rented from another party might be a personal residence, but would not be a homestead because it is not owned by the party who resides in it.

Laws in some states may limit the power of your spouse to release your ownership rights in your homestead. Therefore, if you've named your spouse as your Agent, it may be necessary to appoint a substitute Agent for the purpose of releasing your rights in your personal residence.

Will your Agent have the authority to handle banking transactions on your behalf?

Banking Transactions

The power to handle banking transactions includes the authority to open, maintain, and close bank accounts, as well as make withdrawals, deposits, or conduct other transactions on the account. For example, this allows your Agent to access your accounts in order to pay your bills when you are unable to do so, or to make your investment decisions for you. You may limit the authority to specific bank accounts, or provide authority over all bank accounts held by you.

What special powers will your Agent be granted?

Special Powers

A Special Power of Attorney document provides the Agent with only those powers that are listed in the document. This program allows you to choose from the following special powers:

• Handle banking transactions;
• Enter safe deposit boxes;
• Handle transactions involving U.S. securities.

Also:

• Collect debts;
• Sell real estate;
• Mortgage real estate;
• Manage real estate;
• Sell personal property;
• Borrow money;
• Manage business interests;
• Handle government matters;
• Make financial decisions;
• Make estate planning decisions, including gifts;
• Indemnify third parties.

If limiting the Agent's power to this list is not desirable, a General Power of Attorney which is broader in scope may be more appropriate. The above powers are all available in a General Power of Attorney document. See the General Powers topic for more information.

Will your Agent be allowed to sell real estate that you own?

Selling Real Estate

You may want to give your Agent the authority to sell real estate owned by you. This could include your residence or other property you may own, such as rental property. You can choose to grant authority over only specific real estate, or all real estate owned by you. For example, this would allow your Agent to handle the sale of your home if you have to move to a long term care facility for health reasons, or if you have to relocate suddenly and will not be available to handle the sale of your home.

If your spouse is your Agent, who will be appointed as substitute Agent to sell or mortgage real estate?

Your Spouse as Agent

If your spouse is your Agent and you have authorized your Agent to sell or mortgage real estate, you will be asked to appoint a substitute Agent.

Generally, it is acceptable and quite common to name your spouse as your Agent. However, some states have special laws restricting the spouse from selling or mortgaging your residence. In that situation, a spouse can still be the primary Agent, but, in addition, a substitute Agent should be appointed to handle your real estate.

Without regard to real estate issues, it is also advisable to name a successor Agent who can serve if your spouse becomes unable to do so, or if you become legally separated or divorced from your spouse.

Will your Agent be allowed to mortgage your real estate?

Mortgaging Real Estate

The power to mortgage real estate allows your Agent to borrow money, pledging your property as collateral. For example, this power may be useful in allowing your Agent to obtain additional funds that may be needed to cover expenses, or to allow the Agent to take advantage of investment opportunities that may arise. As with the power to sell real estate, the power to mortgage real estate can be limited to specific property only, or it can apply to all real estate owned by you.

Will your Agent be allowed to manage real estate that you own?

Managing Real Estate

If you own real estate other than your residence, you may want to grant authority to the Agent to manage that real estate for you. This would include making repairs, collecting rent, or performing various other duties of a landlord. Additionally, it may involve the power to hire individuals or companies to carry out repairs, maintenance, or other duties.

Will your Agent be authorized to handle Florida real estate transactions?

Florida Real Estate

If a Power of Attorney grants the Agent authority over real estate located in Florida, it must contain the signatures of two witnesses to be effective. The state of Florida requires two witnesses for the document to be recorded. Recording the document provides notice of the Power of Attorney to anyone who might be interested in the property.

Even though the Power of Attorney may be signed in a different state, if it grants authority over Florida real estate, these requirements must be met. This program automatically provides the necessary signature lines when Florida real estate is involved.

Will your Agent be allowed to sell your personal property?

Personal Property

The power to sell personal property includes a wide variety of assets and powers. Personal property can include both "tangible" personal property (cars, sporting equipment, jewelry, etc.) and "intangible" personal property (an account receivable, shares of stock, etc.). For example, your Agent will be able to handle the sale of a vehicle owned by you if you are required to relocate suddenly or you are simply away for an extended period of time. The power may also be used to allow your Agent to sell personal property such as household furnishings if you are required to move for health reasons. In granting the power, you should indicate whether the authority is granted over only specific property (which should be specifically identified) or whether the authority is over all personal property owned by you.

Will your Agent be authorized to obtain credit or borrow money for you?

Borrowing Money

You may want to give your Agent authority to obtain credit or borrow money on your behalf. This power is useful in allowing the Agent to oversee and take advantage of investments, or it may simply be useful in allowing the Agent to cover day-to-day expenses. You may limit the amount which the Agent may borrow on your behalf or allow the Agent to decide how much may be necessary. In either event, it is important to remember that you are bound by your Agent's actions, and you are obligated to repay any amounts borrowed under the power of attorney.

Will your Agent be authorized to manage, control, and operate your business?

Business Afairs - Special Power of Attorney

If you want to grant authority to your Agent to manage, control, and operate your business, it is necessary to identify your business by stating the name and address. For example, this would allow the Agent to pay employee salaries, pay payroll taxes, pay creditors, order inventory, and manage the day to day operations of the business. You may want to grant full authority over the business operations to your Agent or you may want to limit that authority so that he or she cannot sell, dissolve, or close the business.

Will your Agent be authorized to handle governmental matters for you?

Government Matters

It may be helpful in certain situations to grant the power to your Agent to handle governmental matters for you. For example, your Agent could handle the preparation and filing of tax returns with the Internal Revenue Service. Other types of governmental matters may relate to governmental benefits, such as Medicare or Social Security. This power may be especially useful in situations in which you are unable to negotiate issues, such as Medicare benefits because of mental incompetence or other health problems.

Will your Agent be authorized to handle miscellaneous financial matters for you?

Financial Matters

In addition to banking transactions, you may want to allow your Agent to make various financial and investment decisions for you. For example, this may include the power to handle stock, bond, commodity, or insurance transactions. You may want to grant this power to allow an Agent to handle issues that may arise with insurance or other employee benefit situations, such as health insurance claims for medical treatment and procedures required by you.

Will your Agent be allowed to make gifts on your behalf?

Estate Planning Decisions

The power to make estate planning decisions includes granting authority to your Agent to transfer assets to a revocable (living) trust established by you. Perhaps the most important of these powers is the power to make gifts to others on your behalf. Another essential estate planning tool is the power to refuse any inheritance you might receive, usually for tax advantage reasons. It is recommended that this power be granted to the Agent for possible use if such an inheritance occurs.

Do you want to appoint a substitute Agent for the sole purpose of making gifts to your Agent?

Gifts to Your Agent

Generally an Agent may not use his or her powers to make gifts to the Agent. If you want to provide an opportunity for the Agent to receive gifts, you should appoint a substitute Agent for the purpose of making those gifts. The substitute Agent would have authority only for the purpose of making the gift to the primary Agent. The person named as substitute Agent can, but need not, be the same person who serves as substitute Agent for other purposes, such as to handle your real estate, or it could be the person that you named as your successor Agent.

Will your Agent be authorized to protect any third party who accepts and acts under this document?

Hold Harmless

Some Power of Attorney documents contain a provision that authorizes the Agent to indemnify third parties who may take actions based on the Power of Attorney. This provision grants authority to the Agent to assume any liability that may be imposed on the third party. This means that the Agent would pay the amount of any judgment entered against the third party or would repay to the third party any amounts he or she may be required to pay, based on actions taken in reliance on the Power of Attorney document.

FOR EXAMPLE:

The Agent may request that funds be taken out of a particular bank account, held jointly by the Principal and another party. The bank officer may request to see the Power of Attorney document. The officer then disburses funds from the account to the Agent. If the other owner of the account then asserts a claim and gets a judgment against the bank for disbursing funds to the Agent (who was not an owner of the account), the Agent will be authorized to reimburse the bank for any amount the bank is required to pay as a result of that claim.

By including an indemnity provision in the Power of Attorney, third parties receive some assurance that they will not be penalized for any actions they may have taken in reliance on that document. This will make it easier for the Agent to conduct business because

third parties will accept the Power of Attorney more readily. However, it is important to remember that any amounts reimbursed by the Agent will come from the Principal's funds.

Will your Agent be entitled to receive compensation for services?

Agent Compensation

Often Agents serve without compensation. It is advisable for you to state your preference in the document to avoid uncertainty at a later time when you may be unable to state your intentions. For example, a family member may serve as Agent during your lifetime, and then to the dismay of the rest of the family after your death, the Agent makes a claim against your estate for compensation for acting as your Agent.

The Agent may be required to devote much time and effort in carrying out the powers granted in the document. For this reason, you may want to consider compensating the Agent for performing those duties. The amount may be a set fee for each period, for example $500 per quarter, or it may be based on the actual amount of time spent carrying out the duties. In either event, compensating the Agent may serve to motivate the Agent to devote sufficient time and effort to conduct your business in a satisfactory manner.

Will your Agent be entitled to be reimbursed for reasonable expenses?

Agent Reimbursement

In the course of carrying out the duties under the Power of Attorney document, your Agent may incur certain expenses, for example telephone or copying charges, or mileage for travel. You may want to provide that the Agent will be reimbursed for any reasonable expenses incurred. This may be especially true if a family member or other loved one agrees to act as Agent without compensation. Reimbursing your Agent for expenses incurred will help to lessen the burden on the Agent.

Do you want to make this document a Durable Power of Attorney?

Durability

The Power of Attorney document can be made "durable." This means that the powers granted to your Agent will continue in effect even if you become disabled or lack sufficient mental competence to handle your own affairs. Under English law, on which American law is based, Power of Attorney documents STOPPED being effective if you became mentally incompetent. This was intended to protect you from inappropriate actions that might be taken by the Agent without your ability to respond. However, most Principals are willing to take this risk because the possibility of the Principal becoming incompetent is a primary reason for having the Power of Attorney.

In fact, many principals do not want the Power of Attorney to become effective UNTIL they become mentally incompetent. American law has responded to this desire by allowing you to specify that the Power of Attorney (i) "shall not be affected by my disability or lack of mental competence," or (ii) shall become effective "upon written certification. . . that I am disabled or lack sufficient mental competence" (a "springing" power of attorney). Thus, such Power of Attorney documents are said to be "durable," that is, the power granted under the document survives the fact that you have become mentally incompetent.

Making the Power of Attorney durable allows you to select the individual who will handle your affairs if you become incompetent. In the absence of a Power of Attorney, the matter would have to be presented to a court who would then appoint a conservator to handle your affairs for you. You would not be able to select the individual in that situation.

Note: The "springing" power of attorney is not available in Florida. In Florida, the Power of Attorney will go into effect immediately after it is signed and delivered.

When will this Power of Attorney become effective?

Effective Date

This program offers flexibility in allowing you to specify when the document becomes effective and when it terminates. You may want to state that the Power of Attorney will go into effect immediately, or you may want to provide that the power will go into effect only at such time as a physician certifies in writing that you are disabled or lack sufficient mental competence to handle your own affairs (a "springing" power of attorney). On the other hand, you may want to provide a specific beginning date and ending date for the power. This may be especially appropriate if the power is being granted for a specific situation, for example if you are traveling out of the country for one year and will not be able to manage your affairs during that period of time.

Note: The "springing" power of attorney is not available in Florida. In Florida, the Power of Attorney will go into effect immediately after it is signed and delivered.

Do you want to include the name of the person who prepared this document?

Preparer

In some states, the name of the person who prepared the power of attorney document must be indicated in the document as a requirement for recording the document. Most power of attorney documents are not recorded, but it may be required if the Agent handles real estate transactions for the Principal. This program provides the option of including the name of the preparer.

SIGNING INSTRUCTIONS

The Power of Attorney should be signed by a Principal who is mentally competent and the signature should be notarized. Notarization is required because it makes it harder for a third party to challenge the validity of the signature. In addition, notarization allows the document to be "recorded" for use with real estate transactions, if recording becomes necessary or advisable. Eleven states, Arkansas, Connecticut, District of Columbia, Florida, Georgia, Michigan, Ohio, Oklahoma, South Carolina, and Vermont, require that the Power of Attorney be signed in the presence of two witnesses. Pennsylvania requires that the Power of Attorney be signed in the presence of two witnesses, that the Principal sign the Notice at the beginning of the Power of Attorney, and that the Agent(s) sign the acknowledgment at the end of the Power of Attorney. The Power of Attorney (in any state) also must be signed in the presence of two witnesses if the power to handle Florida real estate transactions is granted. Arizona requires one witness. Furthermore, in some states, the name of the person who prepared the Power of Attorney document must be indicated in the document in order for it to be recorded.

A Power of Attorney is not legally binding unless the Principal is mentally competent at the time of the signing. If there is any question regarding competence, it is best to obtain a physician's written opinion that the Principal understands the document and the consequences of signing the document. It is also advisable to review any competency issues with a lawyer.

The Agent designated in the document should be advised of the location of the original copy of the Power of Attorney document and given access to that original. You should retain a copy for your files.

CAUTION: Before signing this document, you should consider its consequences. You are providing another person with the power to handle business and legal matters on your behalf. Any such action undertaken by that person within the scope of the Power of Attorney document is legally binding upon you.

SOUTH CAROLINA ONLY

This Power of Attorney is not valid unless it is signed by a Principal who is of "sound mind" and at least 18 years old.

If the Principal is unable to sign due to physical disability, another person may be able to sign on behalf of the Principal, in the Principal's presence, and at the express direction of the Principal. However, this document does not provide the necessary language for another person to sign for the Principal. For assistance with this procedure, a lawyer should be contacted.

The Power of Attorney should be signed by the Principal in the presence of two DISINTERESTED adult witnesses and a notary public.