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It's The Law: Powers Of Attorney Can Be Important

Question:A friend of mine recently finished estate planning documents. He told me his attorney suggested a power of attorney as part of those documents. Can you explain power of attorney?

Answer: A power of attorney is authorization from a principal for another person, the attorney-in-fact or agent, in the principal's place. In some cases, the power can be oral. The principal can authorize an agent to sign a contract with the principal's name. However, it can be difficult to prove the attorney-in-fact was authorized under an oral agreement and, in many cases, a written power is required for effectiveness, such as when signing a deed conveying real estate.

Under Florida statutes, if a power of attorney requires execution and delivery of a recordable document, the power must be executed with the same formalities as required of the instrument to be recorded and the power must also be recorded in public records. Even if properly signed, the power may not be accepted and the holder of the power may be unable to use it because the other party to the transaction is worried that the power is invalid. The banker might not allow access to bank accounts. A buyer might not be willing to pay if a bill of sale or deed is not being signed by the actual owner. If the principal is dead, incompetent or has withdrawn the power, action under the power may be void.

To offer some protection to people dealing with attorneys in fact, Florida statutes require that upon request an agent must provide a sworn statement that he or she has no knowledge that the principal is incompetent or dead. It can also be required that the agent provide a sworn statement that the power of attorney has not been revoked. Anyone relying on action under a power of attorney who obtains an affidavit from the attorney in fact that he or she has no notice of death of the principal can rely on the power of attorney and the act of the agent will be binding even if the principal is dead. This protection is not provided by statute for incompetency.

Despite the statutes, powers of attorney are often viewed with suspicion because those dealing with the agent do not want to risk the power being invalid. Accordingly, Florida has yet another statute addressing powers of attorney. Section 709.08 authorizes what is known as a durable power of attorney. The durable power has generally been the power of choice in the estate planning context.

A durable power of attorney means what it says. The power survives incapacity of the principal. As all other powers of attorneys, it does not survive death, although the power remains effective under the statute validating action under a power of attorney if the agent did not know of the principal's death. In estate planning, the durable power of attorney is considered a back up for incapacity. If you are disabled or unable to take care of financial matters or with insurance companies, your attorney in fact can act for you. That makes it important that the power stand beyond your incapacity, as specifically authorized by the durable power under Florida statutes.

A durable power of attorney must be in writing and executed with the same formalities required for conveyance of real property. The statement mandates it contain the words: "This durable power of attorney is not affected by subsequent incapacity of the principal except as provided in S.709.08, Florida statues", or similar words. The attorney in fact under a durable power may exercise the authority granted until the principal dies, revokes the power or is found incapacitated by a court, unless the court authorizes continued action under the power of attorney. If a court action is filed to determine the principal's capacity, the power of attorney is suspended, except for any authority granted to make health care decisions for the principal. The statute provides that any third party may rely upon the authority granted in the durable power of attorney until receiving notice that the power has been revoked, the principal is dead, or that proceedings are pending to determine incapacity or appoint a guardian for the principal. Statute also includes suggested form from an affidavit which can be requested from the attorney in fact to confirm the power is valid.

The statute does not mandate third parties allowed use of the durable power. But, if a third party unreasonably refuses to allow an attorney in fact to act under a durable power and a lawsuit is filed because of that refusal, the prevailing party is entitled to damages and attorney's fees. Third parties do not face statutory liability in connection with other powers of attorney.

A power of attorney can be broadly worded or can be limited to specific action. Selection of the attorney in fact is important. A power can provide significant protection in the event of illness or incapacity, and can be of particular benefit when dealing with insurance companies or the government on behalf of the ailing spouse or loved one.

A power of attorney can be an important part of estate planning. I suggest you meet with an experienced attorney to discuss the possible benefits of a power of attorney in your particular circumstances.

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