Washington Law Imposes Important Rules for Powers of Attorney
Posted Wednesday, December 13, 2017 by Pivotal Law Group
What is a power of attorney? For many folks, a power of attorney, i.e., a legal document designating another person to act on your behalf as your “agent,” is a critical part of an estate plan or other legal arrangement. While it might seem straightforward to appoint a person to act on your behalf in case you become too ill or otherwise unable to manage your own affairs, this is not always the case. Washington law provides important rules governing powers of attorney that can make these documents more complex than might meet the eye.
First, to be valid in the first place, powers of attorney must follow certain formal requirements. The document must use the explicit term “power of attorney” and grant authority to an agent to act in the principal’s (i.e., your) place. The principal’s signature must be either notarized or witnessed by two unrelated persons who are not the principal’s home health or similar caregivers.
Unless otherwise provided, powers of attorney automatically take effect upon signing and automatically terminate upon death, revocation or divorce. Principals may detail specific circumstances (e.g., illness or incapacity) under which their power of attorney takes effect, and may even designate specific persons to determine when those circumstances are present.
Importantly, powers of attorney can grant broad powers to the agent by default simply by mentioning certain topics. For instance, powers of attorney mentioning real estate permit the agent to mortgage the property or remove buildings; references to financial institutions permit the agent to close accounts; references to businesses permit the agent to terminate the principal’s ownership or fire employees. A power of attorney may grant greater or more detailed powers than might appear at first blush.
Conversely, certain authority is presumed not to be granted to the agent unless the power of attorney explicitly provides as such. This includes important powers such as making gifts over the federal gift tax exclusion or making health care decisions.
Also important is that a power of attorney can implicate the principal’s will or other parts of their estate plan. Agents can often deviate from the principal’s estate plan if the agent does not know about the estate plan, or if the agent concludes the estate plan is not consistent with the principal’s best interest. This is especially important because the principal’s would-be heirs generally can’t sue the agent over changes to the principal’s estate plan.
Finally, a power of attorney can automatically terminate if a court appoints a legal guardian for the principal, which might occur if someone petitions the court claiming the principal can no longer manage their own affairs. This might alarm principals who execute a power of attorney because they desire certainty as to who will manage their affairs should they become incapacitated. Principals can maintain some certainty by nominating a prospective guardian in their power of attorney. The court appointing a guardian must appoint the principal’s nominee absent good cause.
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