When does power of attorney take effect?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

UPDATED: Jul 15, 2021

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A power of attorney is a legal agreement that specifies a decision-maker in the event of incapacitation. In other words, a power of attorney is someone trusted with making financial, legal, and medical decisions for someone who can no longer do it themselves. The person who creates the power of attorney is the principal. With a power of attorney document, the principal is still competent, and therefore their financial affairs and other decisions rest entirely in the hands of that person.

If a power of attorney document is not prepared in advance, the court makes the decision after the person requires a power of attorney. At this time, the person trusted with the job of making decisions is called a guardian. In both instances, the power of attorney does not take effect until after the person is considered legally incapacitated.

When should a power of attorney be drafted?

The conservative answer to this question is that everyone should have a power of attorney prepared in case of unanticipated incapacitation. For example, it can be beneficial for married couples to draft a power of attorney at the same time they draft a will. The document, in the case of couples, can simply specify that each spouse is considered the legal power of attorney for making all decisions. Along with this form of power of attorney document, it is also a good idea to draft and sign a medical power of attorney.

The realistic answer is that most people do not even think about drafting a power of attorney until they are diagnosed with a serious illness that will eventually lead to incapacity. Common examples include certain forms of cancer, Alzheimer’s disease, and dementia. In these instances, people may only have months before the power of attorney must be enacted.

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What does incapacity mean?

A power of attorney does not take effect until the principal is considered legally incapacitated. There are two forms of incapacitation that can result in the power of attorney taking effect. The first is physical incapacitation. For instance, the person enters into a coma or has a stroke making communication impossible. At this point, the power of attorney takes over. The second reason is mental incapacitation. This is where a mental disease destroys the principal’s ability to rationally make decisions or the person becomes legally insane.

When does the power of attorney end?

Typically the power of attorney ends at the death of the principal. This is because the power of attorney document does not take effect until it is clear that the person’s condition is serious. Upon the principal’s death, the trustee or executor of the will collects all financial and personal information from the power of attorney and distributes the deceased person’s assets accordingly.

The less common way that a power of attorney ends is in a full recovery by the principal. For instance, if the principal is no longer considered legally insane or has come out of a coma. When this happens, the principal simply revokes the power of attorney and the person who was in charge gives all power back to the now-competent person.

What are the different types of power of attorney documents?

There are two types of power of attorney documents or ways that the power of attorney can make decisions for the principal. The first, and most common way, is that the power of attorney takes over all decision-making at the time when the principal is diagnosed as being medically incapacitated or legally incompetent. Once this happens, the principal may no longer make financial decisions unless they are later found to have recovered.

The second power of attorney document is known as a partial power of attorney. In this instance, the disease may be in its early stages and so the principal is capable of making basic financial decisions such as balancing their personal checkbook and paying bills but cannot make more complex financial decisions such as managing a business or investments. In this instance, the more complex financial decisions become that of the power of attorney. In the second option, there is typically also a clause stating that once the principal can no longer make simple decisions, the power of attorney has legal authority over those as well.

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