What is a General Power of Attorney?
A power of attorney is a delegation of authority by one person (usually called the principal) to another person (usually called the attorney-in-fact or agent). The attorney-in-fact is authorized to sign the name of the principal on legal documents, and the signature of the attorney-in-fact is binding on the principal. Attorneys-in-fact can sign deeds, mortgages, real estate contracts, and a variety of legal and financial documents in this manner.
A common use of this power (and relevant to our field) is during real estate closings. For example, if a husband and wife sell their house, but the husband is out of town at closing, he might sign a power of attorney authorizing his wife to represent him legally on paper. In this case, the wife would sign every document twice at the closing: once as herself, and again as her husband.
Durable and Limited Powers of Attorney
An important note about the duration of this power though: a power of attorney becomes invalid or terminates when/if the principal no longer has legal capacity to sign their name themselves. Say the principal develops dementia or Alzheimer’s, progression would eventually cause them to lose their legal capacity to sign contracts. In this case the agent’s power of attorney becomes null as well. The exception is a durable power of attorney: it survives a principal’s legal incapacity. In this case the attorney-in-fact will retain power to sign, even after the principal loses capacity to write their own name.
If the power of attorney is for specific acts, or specific matters, then it would be called a limited power of attorney or specific power of attorney. Whether the power of attorney is general or limited, the principal always has the ability to terminate the power of attorney, but it naturally terminates upon the death of the principal.
Misuse of Powers of Attorney
One of the most common exploitations is for the agent to use their power of attorney for a purpose for which the principal did not intend for it to be used. A classic misuse is for the attorney-in-fact to sign a deed transferring the principal’s land to themselves (the agent).
Another misuse would be to use the power to borrow money in the principal’s name without the principal’s knowledge or authorization. Say an agent’s authority is limited to selling property; if the agent needs money and is dishonest, they could borrow money for themselves in the principal’s name, using the principal’s property as collateral.
The solution? Pick someone you trust. Generally, we see attorneys-in-fact that are also spouses, close family members, children, etc. But regardless of blood ties, anyone could fit the bill for you as long as you trust them to not misuse the power.
While powers of attorney are used often at real estate closings, some title companies are stricter about their use than others. While some companies will readily accept a wife or husband’s word and document that they have legal power of attorney to sign for their spouse, some companies will still want to know more about the situation, or even call the spouse to confirm. In all cases, the attorney-in-fact should always keep the original document on hand during situations in which it might be asked for.