As Americans finalize their estate plans, including wills and trusts, many also execute a power of attorney (POA) to authorize another person to act on their behalf. It is a time-tested tool used to help ensure personal, financial and legal affairs are kept in order.
In Florida, a POA generally grants authority to an agent to act for the principal. This may involve financial decisions, asset management, signing deeds, entering contracts and in some instances, making gifts or creating trusts.
POAs grant varying degrees of authority. A limited POA gives an agent authority over one asset, such as signing documents or selling real estate. A general POA provides broader authority to act on behalf of the principal. Unlike limited or general POAs, a durable POA remains effective even if the principal becomes mentally incapacitated or unable to make decisions for themselves. It is a useful tool to help avoid guardianship proceedings in the event of incapacity.
The designation of health care surrogate is often used alongside a POA to authorize medical decisions and allow communication with doctors and health care providers under HIPAA. In all cases, it is critical to choose a trustworthy agent.
Despite their common use, POAs are often misunderstood.
For example, not all people realize that a POA terminates when the principal passes away. Many believe they can settle a decedent's estate, sign documents or pay bills using a POA on behalf of the deceased. This is not the case as a POA becomes invalid after death.
Another myth is that a POA is irrevocable or allows the agent the ability to control the principal's finances against their wishes. As long as the principal remains mentally competent to make decisions, they may revoke the POA or remove the agent at any time.
Another misconception is that the agent needs the principal's approval for every action. This also is false. In fact, once properly executed, an agent may act within the scope of authority granted and third parties may rely on the POA alone. However, agents are bound by fiduciary duties and must act in the principal's best interests or reasonable expectations. Florida law forbids self-dealing and other abuses and provides recourse, including lawsuits for breach of fiduciary duty to act in the principal's best interests.
A POA can be tailored as broadly or as limited as the principal decides. Done well, a POA can help protect the principal's assets, support health care planning and reduce the likelihood of guardianship, while providing peace of mind.
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