The power of attorney creates an agency relationship between two persons — the person who delegates authority to do specific things is the principal. The person who is given the authority to act on the principal’s behalf is the agent, or “attorney in fact.” The principal-agent relationship involves a very high degree of trust and the agent is a fiduciary. Furthermore, a power of attorney only operates during the principal’s lifetime, the agent’s authority ends with the principal’s death. That is the point at which the Last Will and Testament is effective and the appointed Personal Representative (PR) administers the testator’s estate. The same person who served as agent under a power of attorney could very well be the PR serving under the Will.
Powers of attorney come in two basic forms: “general” and “limited.” Married couples typically include both of these powers of attorneys in their estate plans. When a power of attorney is made “durable,” the authority that the principal granted to the agent continues even after the “principal is subsequently disabled or incapacitated.” A.R.S. § 14-5501.
General Power of Attorney
The general power of attorney gives the agent the authority to step in and take control of the principal’s finances, which means buying and selling property, paying debts and obligations, investing, and much more. The general power of attorney is a very powerful instrument, and those financial powers should be cautiously delegated.
An agent may face criminal sanctions for violating the fiduciary responsibilities owed to the principal. An agent under power of attorney cannot receive any benefits from the principal unless those benefits are specifically written into the instrument. Otherwise, the agent could be subject to criminal prosecution or subject to penalties, including the loss of the agent’s right to inherit from the principal, damages, and attorneys’ fees.
Now that your divorce is pending, if your spouse is your agent under a general power of attorney, then you may wish to revoke that appointment.
Limited Power of Attorney.
A power of attorney may be limited, or restricted, to the performance of specified acts. Probably the most recognizable example of the limited type is the healthcare power of attorney. As you would expect, couples frequently appoint each other as their healthcare power of attorney, so this is another change that you should consider in light of your divorce.
Under the healthcare power of attorney, the principal delegates authority to make healthcare decisions to an agent. The agent’s authority is restricted to healthcare matters, and limited to making decisions when the principal is incapacitated or unable to make those decisions for himself or herself. These can be life and death decisions. The agent steps in and takes over the decision-making for medical care, signs consent forms, allows and disallows medical treatment and surgical procedures.
When a principal appoints another as agent for healthcare purposes, a living will is often coupled with the healthcare power of attorney. (A living will is unrelated to the Last Will and Testament.) The living will is a directive from the principal to the agent — the instructions that the principal wants the agent to follow. If there is an accident, for example, and the principal is injured and in a coma, the agent looks to the living will for guidance on treatment options in keeping with the principal’s wishes. If you create a healthcare power of attorney, it is recommended that you also include a living will with your directives.
Arizona laws regarding powers of attorney:
A.R.S. § 14-5501: Durable Power of Attorney; Creation; Validity
A.R.S. § 14-5506: Powers of Attorney; Intimidation; Deception; Definitions
A.R.S. § 36-3224: Sample Healthcare Power of Attorney
A.R.S. § 36-3251: Prehospital Medical Care Directives; Form; Effect; Definition [Do Not Resuscitate]
A.R.S. § 36-3262: Sample Living Will
A.R.S. § 36-3286: Sample Mental Healthcare Power of Attorney
For more information on divorce and estate planning:
Divorce and Estate Planning — Protecting Your Assets
Divorce and Estate Planning — Intestate Succession
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