Understanding a Power of Attorney (POA): Your Role as an Agent

If you're an only child, the oldest child, or simply the most responsible, there's a good chance you're named as the power of attorney agent (attorney-in-fact) in your parents' estate planning documents. This is one of the perks of being in the sandwich generation. Your roles and responsibilities can vary significantly based on the type of POA assigned to you and the specific language in the documents.

Being named as the POA is a significant responsibility that can feel both burdensome and rewarding. On the one hand, you must make crucial decisions on behalf of someone else. On the other hand, it means they trust you enough to make these decisions (or you're the last option).

We understand the challenges that come with this responsibility, as we’re in the sandwich generation ourselves. These challenges can be greatly magnified if you or your parents are small-business owners, or if you’re just trying to maintain your position in your IT or Biotech role, as many of our clients are. That’s why we’re always happy to help our clients talk through these situations, so they can make the most informed decisions possible.

What is a Power of Attorney?

A Power of Attorney (POA) is a legal document allowing the owner (or principal) to designate someone (the agent or attorney-in-fact) to act on their behalf. POAs typically take effect when the principal becomes incapacitated, ill, or takes an extended leave of absence.

It's important to note that POAs are primarily governed by state law. While many states offer similar options, there are likely some differences. Here are some general types of POAs:

5 Most Common Types of Powers of Attorney

POAs can be specifically tailored to meet various situations and objectives, from the very broad to the uniquely specific. Here are the most common types:

1. General POA – This type provides a broad range of powers to the Agent, including managing finances, signing legal documents, and making various other personal and business decisions.
2. Durable POA – Common in basic estate planning, this POA takes effect if the principal becomes incapacitated. These powers generally include finances and basic decisions but can be very broad or limited depending on the principal’s wishes.
3. Medical POA/Healthcare POA – Included in basic estate planning, this POA allows the Agent to make medical decisions on behalf of the principal when they cannot make those decisions themselves. The principal can fully detail their wishes or leave everything up to the Agent. These can also detail end-of-life care to alleviate guilt.
4. Springing POA – This POA “springs” into effect when a specific event occurs, such as incapacity, business-related issues, travel, or other events.
5. Limited POA – Grants limited powers with specific guidance. These can include signing a contract, managing a specific account, or handling other particular tasks.

Your Role as an Agent (Attorney-in-Fact)

Your role and responsibilities as an Agent will depend significantly on the type of POA document(s) you’ve been named in. Your primary duty is to make decisions based on the best interests of the owner/principal, in compliance with any specific terms, conditions, and limitations in the POA.

Here’s a list of general responsibilities you might have. However, each POA document is unique, so it's strongly encouraged to discuss the specifics with an attorney and the owner/principal:

• Managing Finances – Paying bills and taxes, managing daily cash flow and banking needs, handling investment and business finances, and making prudent decisions on their behalf.
• Managing Insurance – Shopping for various insurance coverages, paying premiums, filing claims, and starting annuity payments.
• Handling Taxes – Filing personal and business taxes, ensuring compliance with applicable tax laws, making estimated payments, and maintaining accurate records.
• Accessing Important Items – Managing business or property records, medical records, safe deposit boxes, or other restricted items.
• Managing Property – Handling real estate maintenance, management, transactions, seeking appraisals, registering vehicles, or buying/selling personal property.

It’s crucial to maintain detailed and accurate records of all decisions and transactions made on behalf of another. This helps protect you in case of future claims.

What is Not Your Role?

Generally, anything not explicitly listed in the POA documents is not authorized. When in doubt, always consult with an attorney.

There are two things an Agent can never do on behalf of the owner: voting and creating or modifying estate planning documents. Additionally, engaging in illegal activities or using the principal’s property or assets for personal benefit is prohibited unless explicitly authorized (except for illegal activities, which are never allowed).

Parting Thoughts

Each POA document is drafted specifically to the owner/principal’s wishes, desires, and particular situation. As a result, it’s impossible to know exactly what your role and responsibilities will entail without reading the document and consulting with an attorney.

Being appointed as someone’s Agent (attorney-in-fact) indicates that person has immense trust and respect for you. They’re entrusting you with decision-making power for their most important decisions, so the position should not be taken lightly.

If you’ve been appointed as the POA for a loved one and are unsure of how to manage their finances or make business decisions, or are just feeling overwhelmed with trying to manage someone else’s finances while trying to keep your family’s finances in order, you’re not alone. We’ve chosen to work with people like yourselves in the sandwich generation for a reason, and we’ll be happy to help provide clarity and guidance.

This is not legal advice, but is intended for general informational purposes. Please consult with a qualified legal professional.