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Do You Know the Limits of Your Powers of Attorney?
The power of attorney for finance and the power of attorney for health care are two essential documents of estate planning. These documents give a person (the agent) the power to make, respectively, financial or health-related decisions on behalf of another person (the principal). If you have gone through estate planning, you may have had one or both of these documents drawn up for you. (If you haven’t done any estate planning, now is the time!)
But having these documents may give you a false sense of security. You should know the types, conditions, and limitations of powers of attorney so that if you ever need to rely on them – either as the principal or the agent – you are already informed and know what they can and can’t do.
The Powers of Financial and Health Care Powers of Attorney
A power of attorney for finance (POA) gives an agent the power to make financial decisions on behalf of the principal, such as buying or selling property including real estate, accessing bank accounts, managing investments, signing contracts, or borrowing money. The principal can decide which particular powers they want their agent to have.
Similarly, a health care power of attorney (HPOA) gives an agent the power to make health care decisions on behalf of the principal, such as which treatment plan to follow, doctors to use, medication to give, and arrangements for care. It is a type of advance directive and is called different things in different states, including medical power of attorney or healthcare proxy.
What’s the Difference Between Limited, General, Durable, and Springing Powers of Attorney?
There are different types of powers of attorney and the kind of POA that’s best for you depends on your specific goals.
Limited. A limited power of attorney gives the agent the power to act in a limited capacity and often for a specified time period. This is useful if, for example, you’ll be traveling on the day of a real estate closing, and you want your spouse or business partner to be able to sign for you, in which case you’d want a limited POA for finance. Or if you’re going under the knife and want to give your sister the power to make decisions for you relating to the operation while you’re incapacitated, you’d want a limited HPOA.
General A general power of attorney does not limit the agent’s powers to a particular task or time period, but gives them as much discretion to control and direct the principal’s affairs as the principal chooses. The powers of this type of POA last until the principal’s death or until they revoke the POA.
Durable. A durable POA is one that is in effect even when the principal is incapacitated and unable to make their own decisions, for instance, because they are under anesthesia, have dementia, or are in a coma. South Carolina also recognizes that incapacity can also be because a person is missing, detained or incarcerated, or abroad and unable to return to the U.S. If the POA is not durable, then the agent’s powers end once the principal is incapacitated.
For the HPOA, it makes sense that you’d want it to be durable, because the point of having an HPOA is for someone else to make medical decisions for you when you’re unable to. But for a POA for finance, a principal may want a limited POA to be non-durable, as in the example above where the principal is traveling during a closing. A durable POA for finance is also common between spouses, so one may make decisions for the other in the case of incapacity.
Springing. Unless stated otherwise, in South Carolina the powers in a power of attorney commence immediately. However, some people choose to have a springing POA, where the powers “spring” into effect only once the principal becomes incapacitated. So while a durable POA remains effective once the principal becomes incapacitated, a springing POA only becomes effective once the principal becomes incapacitated.
Someone may feel more secure with this type of POA because they know that their agent doesn’t have any powers to make decisions on their behalf while they have mental capacity, and therefore do something they (the principal) wouldn’t want done. The trouble with this kind of POA, however, is that it can be extremely difficult to pinpoint the moment someone becomes incapacitated, especially in cases of dementia and Alzheimer’s, where a person can have good days and bad days. This can make it impossible to effectively use the POA for its original purpose. This is why we here at the Gem McDowell Law Group do not do springing POAS for our estate planning clients.
South Carolina Requires Powers of Attorney to Be Recorded
On January 1, 2017, South Carolina’s Uniform Power of Attorney Act went into effect, requiring durable POAs to be recorded in order for the agent to exercise their powers once the principal has become incapacitated. (POAs made before this date are subject to the laws that were in effect at the time.) Note that a POA does not have to be recorded for the agent to exercise powers while the principal still has capacity.
How do you record a power of attorney? If you work with an attorney to draft your estate planning documents, they will typically do it for you. (You can ask just to be sure.) If you printed your own off the internet or otherwise didn’t go through an attorney, you may contact your county clerk for instructions on how to record your POA. It must be done so in the same manner as a deed in the county where the principal resides at the time, and may be recorded before or after the principal’s incapacity.
Do You Know What Type Your Powers of Attorney Are?
You can see that with so many different types of powers of attorney, the occasional difficulty of pinpointing when incapacity occurs, and South Carolina’s relatively new requirements for recording POAs, things can get confusing. That’s why it’s so important to review the documents you’ve signed and understand exactly what powers you, as the principal, are giving your agent and when they come into effect.
For comprehensive estate planning that is tailored to your life and the needs of your family, contact Gem McDowell and his associates at the Gem McDowell Law Group in Mt. Pleasant, SC. They can help you draft estate planning documents including powers of attorney, wills, and trusts that will give you peace of mind and protect your family. Call to schedule a free consultation at 843-284-1021.