A power of attorney is a legal agreement between two people that authorizes an agent (the attorney-in-fact) to act on behalf of the principal (the person who is assigning authority over their affairs). Most power of attorney agreements broadly authorize the agent to handle any and all affairs, though they can be tailored to specific functions (e.g. a financial power of attorney or a healthcare power of attorney) and the authority can be withheld until certain conditions are met (e.g. the principal becomes incapacitated). Although the document is legally binding, a power of attorney is not a contract, so it can be unilaterally revoked at any time.
How to transfer a power of attorney
If you issue a power of attorney and later decide to change the attorney-in-fact, you’ll need to revoke the original agreement and draft a new one. In fact, this is the process that’s required anytime you need to make changes to your power of attorney, whether it’s to alter the scope, terms, or durability of the agreement. That may sound like a lot of work, but in reality, the process is pretty quick and easy. You can accomplish the task in 5 simple steps:
- Draft a revocation letter – with the help of your attorney, draft a statement in writing that revokes your current power of attorney. The document should include your name, the date, a declaration that you are of sound mind (i.e. you are not mentally incapacitated), and a brief statement that you would like to revoke your original power of attorney. Be sure to include the date of the original power of attorney, especially if you’ve drafted multiple versions over the years.
- Choose two witnesses – you must be of sound mind to revoke a power of attorney, so you’ll need at least two witnesses to sign a certificate declaring that you are of sound mind at the time of signing. Some states require that you choose disinterested witnesses—meaning the individuals are not beneficiaries to your estate—but Arizona allows interested witnesses, so you don’t have to worry about that in this state. Once you’ve chosen your witnesses, ask your attorney for a witness certificate that you can attach to the revocation letter.
- Have all parties sign the revocation letter – you will sign the letter first, followed by the two witnesses.
- Draft a new power of attorney – if you’re just changing the attorney-in-fact, you can use the text from the original document and simply change out the agent’s name. Just be sure to amend the date if you choose to do that, as the date must reflect the new power of attorney (you can copy/paste everything else over).
- Deliver copies to interested parties – once the revocation letter and the new power of attorney are signed, deliver a copy of each document to the former agent, the new agent, any institutions who previously received the original power of attorney, and any new institutions who will be dealing with the new agent.
What happens when an agent declines to serve under a power of attorney?
While the agent under a power of attorney can’t revoke the agreement (only the principal can do so), the agent always has the right to decline the position. Even if someone agrees to serve as the attorney-in-fact when the original agreement is drafted, he or she can choose to decline at any time, for any reason. However, the agent does not have the ability to give or transfer their authority to another. To do that, the principal would have to revoke the power of attorney and draft a new one.
What if the principal becomes incapacitated?
Considering how an adult must be of sound mind to draft or revoke a power of attorney, it can be problematic if the appointed agent declines to serve after the principal has become incapacitated. At that point, the court can’t compel the agent to serve, and the principal wouldn’t have the capacity to revoke the old agreement and issue a new power of attorney. Instead, the principal’s family would need to request a court-ordered guardianship and/or conservatorship.
Alternatives to a power of attorney – guardianship and conservatorship
When an adult becomes incapacitated and doesn’t have a valid power of attorney (either one was never created, or the agent is unable to serve), an interested party will need to initiate a guardianship and/or conservatorship. These two terms are often used interchangeably in casual conversation, but there’s actually a key difference between them. In a guardianship, the court appoints a caretaker to handle an incapacitated adult’s healthcare and living situation; in a conservatorship, the court appoints a caretaker to handle an incapacitated adult’s finances. Guardianship proceedings refer to the caretaker as the guardian and the subject as the ward. Conservatorship proceedings refer to the caretaker as the conservator and the subject as the protected person.
For adults who are completely incapacitated, the court will usually appoint a caretaker as the guardian and conservator so that they have full control over the ward’s affairs. When an adult is only partially incapacitated (e.g. they can make healthcare decisions but can’t handle their finances), the court may appoint one or the other. In some cases, the court can even appoint a limited guardianship or conservatorship to handle a few limited decisions, such as to sell the family home or place the ward in a care facility.
Generally speaking, a power of attorney is preferable to a guardianship or conservatorship. All three options allow an agent to handle someone’s affairs, but a power of attorney is voluntarily issued, while a guardianship or conservatorship are both granted by a court. The courts will always do their due diligence to ensure that an adult with sufficient mental capacities doesn’t lose their decision-making abilities, but even when done correctly, guardianships and conservatorships still involve stripping an adult of his or her independence against their will.
On top of that, guardianships and conservatorships can be lengthy, costly court proceedings that require ongoing maintenance, including annual reports to the court. In contrast, a power of attorney doesn’t require any maintenance or reporting, and the document can be drafted in a matter of hours. That makes drafting a power of attorney significantly faster and more affordable.