A power of attorney is a written document that authorizes one person to act on behalf of another person. The person that makes the power of attorney is the “principal” and the person who acts for him or her is the “agent.” The agent is also referred to as the attorney in fact. The power of attorney for financial affairs deals with property and contract rights. The agent will rely on the power of attorney as the authority to convey powers to handle all kinds of transactions on behalf of the principal that concern the principal’s property. These kinds of transactions may include paying monthly bills, collecting rents, voting stocks, running a business, buying or selling real estate, or the terms governing admission to a nursing home.
A power of attorney is “durable” when the power remains effective even if the principal is incompetent or unable to communicate. That means, the document is designed to be effective when the principal is disabled or no longer mentally competent, when the principal cannot act on his or her own. The power of attorney must contain specific language in order to qualify under Tennessee law as “durable.”
Things to Think About
A power of attorney for finances is a very important part of planning. The most crucial choice may be who to name as your agent. The person you choose should be trustworthy and conscientious about recordkeeping, organized, responsible, and reliable. You can also name a successor agent. Bond typically is not required but an accounting to another person is recommended. Compensation for the agent is optional but should be set forth in the document.
Powers that are Optional or Extraordinary
Our statute has a long list of powers that most financial agents need to manage property. These are the default powers, such as dealing with money, filing tax returns, and entering contracts. Some special powers to consider adding to the general ones include: making of gifts; exercising powers the principal may have over income or principal of a trust or fiduciary positions occupied by the principal; changing beneficiary designations on bank accounts or life insurance policies; changing right of survivorship designations on real or personal property; disclaiming property; exercising rights of elective share; and making health care decisions.
Being a Fiduciary
If you are named as an agent under a power of attorney, you are considered to be a fiduciary. A fiduciary is in essence a trustee. A fiduciary is a person who is entrusted with a duty or undertaking and must act primarily for another person’s benefit in all matters connected with the undertaking. Scrupulous good faith and candor are required.