Estate Planning Documents: Power of Attorney

by Sheryll Bonilla, Esq.

A power of attorney is authority granted under the Hawaii Uniform Power of Attorney Act, H.R.S. Chapter 551D.

It is a useful document that allows a person to delegate authority to act on his or her behalf and for his or her benefit in case the person becomes incapacitated, such as under dementia, stroke, etc.

The legal fees for preparing a power of attorney are much less (a few hundred dollars) than having to go to court to obtain a conservatorship (a few thousand dollars).

To prepare a Power of Attorney, a person must know who they trust to act for their benefit if he/she loses mental capacity and what authorities he/she wants to grant.

It’s a relatively quick process: give the information to the attorney, the attorney drafts the POA, and the person signs the POA in front of a notary. Here are some quick points about POAs.

Your Power of Attorney dies with you
Often enough, I’ve heard people say, after someone has died, “I have his power of attorney.  Doesn’t that make me the executor?” No. When a person dies, that power of attorney dies with them. The agent no longer has any authority when the principal dies. The agent only has authority while the principal is alive and under incapacity.

It’s not immediately usable
I’ve seen people frustrated with tellers because they can’t use the power of attorney at the bank. If you make a power of attorney, be sure to send a copy to your financial institutions.

Their legal departments need time to review the document. Then the institution will place the POA in your file for the time when you become incapacitated. Make sure to instruct your agent that they need to have a letter from your physician certifying your incapacity and to attach a copy of that certifying letter to the back of the power of attorney when presenting it to the institution to do any transactions.

Proof of your incapacity is required for that power of attorney to take effect, and that doctor’s letter is the proof. Again, the institution may need to review the letter before it can allow any transactions to be done using the POA.

A Power of Attorney can only be made by someone with mental capacity
A power of attorney can be made only by someone of sound legal mind. The principal must know what they are doing by executing a power of attorney and who they are appointing. Once a person loses mental capacity, they cannot execute a power of attorney. The family has to go to court to obtain a conservatorship, a process that can take months.

What are the fiduciary duties of an agent?
A fiduciary is a special role under law. This means the agent must:

(a) Act loyally for the principal’s benefit;
(b) Avoid conflicts that would impair your ability to act in the principal’s best interest;
(c) Act with care, competence, and diligence;
(d) Keep a record of all receipts, disbursement, and transactions made on behalf of the principal;
(e) Cooperate with any person that has authority to make health care decisions for the principal to do what you know the principal reasonably expects or, if you do not know the principal’s expectations, to act in the principal’s best interest; and
(f) Attempt to preserve the principals estate plan if you know the plan and preserving the plan is consistent with the principal’s best interest.

What are the duties of an agent?
When you accept the authority granted under this power of attorney, a special legal relationship is created between you and the principal. This relationship imposes upon your legal duties that continue until you resign, or the power of attorney is terminated or revoked. You must:

(a) Do what you know the principal reasonably expects you to do with the principal’s property, or if you do not know the principal’s’ expectations, act in the principal’s best interest;
(b) Act in good faith;
(c) Do nothing beyond the authority granted in this power of attorney; and
(d) Disclose your identity as an agent whenever you act for the principal by writing or printing the name of the principal and signing your own name as “agent” in the following manner.

The person who makes the power of attorney is called the “principal.” The person who is given authority by that principal is called the “agent.” If you are using the power of attorney, you sign “(agent’s name), Agent for (principal’s name), Principal.” This shows you are acting under the authority of the power of attorney.

What terminates the agent’s authority?
You must stop acting on behalf of the principal if you learn of any event that terminates this power of attorney or your authority under this power of attorney. Events that terminate a power of attorney or your authority to act under a power of attorney include:

(a) Death of the principal;
(b) The principal’s revocation of the power of attorney or your authority;
(c) The occurrence of a termination event stated in the power of attorney;
(d) The purpose of the power of attorney is fully accomplished; or
(e) If you are married to the principal, a divorce or separation complaint is filed, unless the Special Instructions in this power of attorney state that such an action will not terminate your authority.

Should I update my Power of Attorney?
It’s usually a good idea to update your power of attorney if it’s several years old.  Often parents made their trust set when their children are young, and the power of attorney is granted to aunties and uncles. The children are now grown, and the parents can delegate the authority to them, especially if the aunty or uncle is now elderly also. If a power of attorney is more than a few years old, it may be considered “stale” and the institution may have legitimate concerns over whether the POA has been revoked.

How do I revoke my Power of Attorney?
Send a written notice to your agent that you revoke his or her authority.  Make sure you also send a copy of that revocation to all the institutions that have a copy of the POA.

This article is for informational purposes only and is not to be constructed as offering legal advice. Please consult an attorney for your individual situation. The author is not responsible for a reader’s reliance on the information contained here.

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