When asked, I always tell clients that they should have a power of attorney document for financial decisions. When a person signs a power of attorney, he is called the “principal.” The person the principal names to make financial decisions for him pursuant to a power of attorney is called the “agent.” If a person has failed to sign a power of attorney, then no other person can make decisions for him–not his spouse, not his children, no one.
A person can only sign a power of attorney document if he is mentally competent. Specifically, the principal must retain what is called a contractual level of mental capacity in order to sign a power of attorney. Contractual mental capacity is a rather high level of mental capacity.
If a person lacks contractual mental capacity and can no longer sign a power of attorney document, then he may need a legal guardian appointed for him if he can no longer manage his affairs. A legal guardian is appointed through a court procedure. While having a guardian appointed for an incapacitated person is a rather common procedure, the procedure is not without its drawbacks.
For one, a guardianship action costs about $5,000. Aside from the financial costs, being appointed someone’s guardian is emotionally draining on the family, as well.
But whether someone has taken the time to sign a power of attorney document or whether someone had a guardian appointed for him, a question that is often overlooked is this: What if the power of attorney agent or what if the guardian cannot serve in the role of agent/guardian for a temporary period? For instance, what if the agent/guardian is on vacation and a decision needs to be made for the incapacitated person?
There are little know and little used provisions of the laws governing powers of attorney and guardianships that provide excellent answers to these questions. If asked, I would wager that very few attorneys are aware of these provisions of the law.
With powers of attorney, there is a provision of the Revised Power of Attorney Act that permits an agent to delegate his authority to another individual if the power of attorney document permits such a delegation of authority. I can tell you that very few power of attorney documents that I have reviewed contain such a delegation power. I can tell you that the power of attorney documents that I have drafted do contain such a delegation authority.
The fact of the matter is, giving the agent the ability to delegate his authority is a very practical authority. Agents are people with lives of their own. They may get sick, they may go on vacation, they may have temporary issues in their own lives that make it impossible to attend to the affairs of the principal. Giving the agent the ability to delegate his authority can serve a very practical purpose.
Similarly, the guardianship act contains a provision that permits a guardian to sign a power of attorney in favor of another individual giving this third-party the powers of the guardian. The power of attorney can only be effective for a period of six months.
As with an agent’s ability to delegate powers under a well-drafted power of attorney, the ability of the guardian to sign a power of attorney in favor of another individual can serve a very practical purpose. Knowing that such provisions exist in the law permit an attorney to better serve his client.