principal

April 23, 2012 by Rebecca Esmi

Revocation of a POA

A principal may revoke a POA at any time by employing one of three methods. First, the principal may physically destroy all executed originals. Second, he or she can sign and acknowledge a written revocation (per R. S. 46:14-2.1). Finally, the principal may revoke by notice to the attorney in fact.

It should be noted that simply appointing another in a later POA does not in itself revoke an earlier POA, unless the subsequent POA expressly provides. N.J.S.A. 46:2B-8.10.

Prudence dictates that the principal maintain a list of the person or people to whom an original has been given.

April 23, 2012 by Rebecca Esmi

All about “springing” — pro’s and con’s of general and springing durable powers of attorney

The rule under common law is that a POA is extinguished upon the incapacity of the principal. There is, however, an important exception to this rule: the durable POA. There are two types of durable POA, the general durable and springing durable, and each has distinctive features. The general durable POA takes effect immediately upon signing and stays in force even should the principal becomes incapacitated. Yet typically the principal has no need for the attorney in fact to take actions immediately upon execution, but rather only upon the principal’s incapacity – overkill in a sense. Incapacity may never occur, but nevertheless the attorney in fact’s power to act exists from inception. The need for a trustworthy attorney in fact cannot be understated, yet with proper care in selection, such a risk may be rather low. In any event, should the principal in fact become incapacitated, the general durable POA simply remains in full force.

Conversely, the springing POA comes into force only upon the principal’s incapacity. The “pro” is that there is no period of risk during which a misguided attorney in fact can act prior to incapacity. However, it is critical that the POA set forth the process by which the incapacity will be established such as by written certification by an attending physician or the opinion of “my family physician Dr. Johns or a physician in her practice.” Whatever the process, an extra step is required in comparison to a general POA. On the off-chance that incapacity cannot be proven, the attorney in fact would need to seek court intervention giving rise to unwanted delay and cost. This risk is probably rather low, but it still needs to be considered.

NB: Disability is defined pursuant to N.J.S.A. 46:2B-8, when the principal is “unable to manage his property and affairs effectively for reasons such as mental illness, mental deficiency, physical illness or disability, advanced age, chronic use of drugs, chronic intoxication, confinement detention by a foreign power, or disappearance.”

April 23, 2012 by Rebecca Esmi

Power of attorney: powerful alternative to court-imposed surrogate decision-making

A Power of Attorney (“POA”) is a legal document whereby one person, the principal, designates another – the attorney in fact or agent — to act one his or her behalf. The POA provides proof to third parties, such as banks, of the attorney in fact’s authority to act. The principal, in order to create the POA, must have the capacity to contract; as a legal standard, this means the principal must understand the nature and effect of his or her act (See Estate of Joseph J. Zaolino, 1998 WL 34001287 (N.J. App. Div. 1998), unpublished opinion).

There are several varieties of POA. For example, the principal can either limit or expand the power delegated to the attorney in fact. Unsurprisingly, the former variety is deemed a limited POA while the latter expansive type is a general POA.

There are also general durable and springing POAs. Before giving a definition of these two POA varieties, it is important to understand that under common law, a POA became ineffective upon the incapacity of the principal. This is counter-intuitive, as one would expect that a POA is most essential at the principal’s incapacity.

Importantly, there are exceptions: the general durable and springing POAs. A general durable POA is effective despite the principal’s incapacity. As to the springing variety, a general springing POA is effective only if the principal becomes incapacitated.

In order for these POAs to survive incapacity, specific legal language must be employed. If this verbiage is omitted from the POA, the attorney in fact’s authority will not survive the principal’s incapacity.

A general durable POA should state that “this power of attorney shall not be affected by the disability of the principal” so as to survive the principal’s incapacity. The springing variety must state something along the lines of: “This power of attorney shall become effective upon the disability of the principal.” Then, it waits passively until and if the principal becomes incapacitated, only then springing into force.