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5 Things You Need to Know before Executing a Power of Attorney

At some point in your life, you will likely consider executing a Power of Attorney. Given that a Power of Attorney (POA) is among the most familiar of all estate planning tools, people often Murfreesboro divorce attorneyassume it is safe to create one. When you have a clear understanding of the power conferred in a POA, it can be an excellent estate planning tool; however, there is also considerable danger in executing a poorly drafted or misunderstood POA. To help you avoid making a costly mistake, a Murfreesboro estate planning attorney at Bennett, Michael & Hornsby discusses five things you need to know before executing a Power of Attorney.

  1. You can grant a little, or a lot, of power in a Power of Attorney. At its most basic, a Power of Attorney is a legal document that allows you (referred to as the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. A general POA grants your Agent almost unfettered power to act on your behalf in legal matters. Consequently, your Agent may be able to do things such as withdraw funds from your financial accounts, sell or encumber property and assets owned by you, and even enter contracts in your name. A limited POA only grants to your Agent the limited, and specific, authority enumerated in the POA. For example, you might grant an Agent the limited power of attorney to represent you at the closing on the new home you purchased because you will be out of the country on that date.
  2. A POA terminates upon your incapacity unless you make it durable. The desire to appoint someone who can control assets and finances in the event of incapacity is a common motivation for executing a POA. Historically, however, the authority granted to an Agent in a POA automatically terminated upon the death or incapacity of the Principal. That remains the case today for a POA, which creates a problem if you want your Agent to retain his/her authority if you become incapacitated. To resolve this dilemma, the concept of a “durable” POA evolved. When a Power of Attorney is made durable it simply means that the Agent’s authority survives the incapacity of the Principal.
  3. Your Agent may have the authority to make gifts. Section 34-6-110 of the Tennessee Code effectively gives an Agent under a general POA the authority to make gifts, in any amount and of any property, to anyone “in accordance with the principal’s personal history of making or joining in the making of lifetime gifts.” If you do not want your Agent to have the authority to make gifts, you need to make that clear within the language of your POA.
  4. Your Agent cannot make medical decisions for you under a general POA. Another common mistake people make is to execute a general POA under the mistaken belief that they are granting someone the authority to make crucial medical decisions for them if they cannot make them. Unfortunately, that is not the case. To appoint someone to make health care decisions for you, it is necessary to execute a special type of advance directive known in Tennessee as a Durable Power of Attorney for Health Care.
  5. A Power of Attorney does not terminate on its own. If you do decide to execute a Power of Attorney, make sure you provide for its termination within the document itself or that you revoke the Agent’s authority when it is no longer applicable. Legally, the authority granted to an Agent does not become “stale” even if the document was executed several years ago. Consequently, it is imperative that you revoke that authority under certain circumstances. For example, if you get divorced, do not forget to revoke your (now ex) spouse’s authority or he/she could legally be entitled to sell your property or clean out your bank account.

Contact a Murfreesboro Estate Planning Attorney

If you have additional questions or concerns regarding a Power of Attorney, consult with an experienced Murfreesboro estate planning attorney at Bennett, Michael & Hornsby as soon as possible. Contact the team today by calling 615-898-1560 to schedule your free appointment.


Dinah Michael