Power of Attorney – a Useful Tool in the Right Hands

A machete is a useful tool for hacking your way through the jungle to the other side. It is not so useful if your friend or family member whacks you in the head with it. Similarly, a Power of Attorney can be a truly helpful tool for management of property and finances, but it can also cause trouble in the wrong hands. Here, we offer some key points regarding this advance planning tool.

A Power of Attorney is a document which can only be signed by a competent adult person who knowingly and voluntarily chooses to do so. The person whose affairs are the subject of the Power of Attorney is known as the “Principal.” In the document, the Principal appoints a trusted person, chosen by the Principal, who is authorized to act for the Principal with regard to financial and legal matters. The person chosen and appointed is termed the “Attorney-in-Fact,” as opposed to an attorney-at-law who is a person licensed to practice law. The Attorney-in-Fact may also be referred to as the “Agent.”  With a properly executed and recorded Power of Attorney, the Attorney-in-Fact may conduct the business of the Principal, pursuant to the authority and limits stated in the document. The Power of Attorney does not remove the power of the Principal to continue to act in his or her own affairs. It merely adds another person who can assist. The Attorney-in-Fact is required to act only in the best interests of the Principal, and is not lawfully permitted to abuse the resources of the Principal or enrich himself at the Principal’s expense. Misconduct may subject the Attorney-in-Fact to civil liability or criminal charges. Still, a Power of Attorney is not abuse-proof. In the wrong hands, it can cause financial injury to the Principal, who may be unable to successfully collect misappropriated or stolen funds. For that reason, it is vital that the person named and authorized to manage your affairs should be absolutely trustworthy and chosen carefully.

A Power of Attorney can be “general,” giving a broad array of powers over all the financial, business, property, and legal affairs of the Principal. Or, it can be “limited,” meaning it is confined to specific business, property, or transactions. For example, if a property is to be purchased or sold in a place far from the home of the Principal, or the Principal will be traveling and unavailable to attend the transaction, the Principal might give a Limited Power of Attorney for that transaction, to allow another person to sign off on the documents.

A properly drafted Power of Attorney can be “Durable,” meaning that it will continue in effect if the Principal loses his or her mental competence, but it can never lawfully be signed by one who is already incompetent. For that reason, if a competent Principal desires a Power of Attorney, a lawyer should be consulted sooner rather than later.  Once competence is gone, the opportunity to put in place a Power of Attorney is lost. If an incompetent person has property, legal affairs, or other business requiring management by another person, the only way to gain authorization to conduct the incompetent person’s affairs is to apply to the Probate Court of the County in which the incompetent person resides, to be appointed as the person’s Conservator. In that proceeding, the Court will require an examination of the allegedly incompetent adult, and appointment of a guardian ad litem and attorney for the protection of the person. Once appointed, the activities of the Conservator are under the supervision and direction of the Court, which will require certain reports and accountings of finances and activities. Thus, a Power of Attorney and a Conservatorship are two wholly separate concepts.

Because the Power of Attorney must be knowingly and voluntarily signed, and the person authorized to conduct the Principal’s affairs must be voluntarily chosen for that purpose, an attorney who is asked to prepare a Power of Attorney should meet with the Principal to discuss the matter thoroughly. While a family member or friend may drive the Principal to the meeting, they will generally be asked to wait in another area while the meeting is conducted. This is for the benefit of the Principal, the loved one, and the attorney, to avoid the appearance or assertion that the Principal was acting under pressure from another person and was not acting voluntarily. South Carolina Powers of Attorney need not be signed by the Attorney-in-Fact who is being given authorization, but the company forms of some investment companies require the Attorney-in-Fact’s signature for compliance with their own requirements.

In South Carolina, the Power of Attorney is only effective if it is recorded in the local office where deeds are recorded. In some counties, this is the Clerk of Court’s office; in others, it is the office of the Register of Deeds. The original Power of Attorney must be recorded in the county of the Principal’s residence, and should also be recorded in any other county where the Attorney-in-Fact seeks to act with regard to the Principal’s property. In other words, if the Principal lives in one county and owns property in another, the Power of Attorney should be recorded in both counties. In order to be recorded, the document must meet certain legal requirements, or the recording authority may reject it and refuse to record. For this reason, an attorney should over see the signing of the Power of Attorney.

The attorneys of Ness & Jett, LLC, stand ready to take your questions concerning Powers of Attorney.