A power of attorney is a legal document that gives someone else the authority to act on their behalf. In California, the person creating the power of attorney is known as the “principle,” and that person chooses an “attorney-in-fact” to act as their agent. A power of attorney is most commonly used for handling financial and/or medical decisions.
With all of its advantages, careful consideration should be given to creating a power of attorney. Since your attorney-in-fact will be ultimately have full legal authority to act on your behalf, it is crucial that you choose someone honest and trustworthy and whom you are confident will act only in your best interests.
Your attorney-in-act will not be subject to direct oversight
Because the attorney-in-fact makes decisions enters into transactions on your behalf, while you are not present, you do not have immediate control over his or her actions. Although an attorney-in-fact is required to follow your instructions, he could make mistakes or, even worse, use his authority to defraud you.
For example, your attorney-in-fact may have the power to withdraw money from all of your bank accounts. You may have asked him to withdraw a certain amount from one particular account, but he mistakenly took money from the wrong account. A worse scenario would be that your attorney-in-fact takes money from your bank account without your permission. The downside is, the bank cannot be held responsible, as long as the power of attorney is valid.
Some entities may refuse to recognize the power of attorney
Even though a power of attorney is legally binding, some banks or mortgage companies may require a specific form or some additional information before they will recognize the authority of your attorney-in-fact. Therefore, if your power of attorney does not comply the bank’s internal policies, your attorney-in-fact will likely have difficulty accessing your accounts and completing transactions.
You must provide notice of revocation to all third-parties
Revoking a power of attorney, simply requires a written statement that the power or authority is being revoked. The complication comes from the requirement that all third parties, with whom your power of attorney has been used, must be notified. This step is a very important, because if a particular bank, for instance, does not receive notice, your attorney-in-fact could potentially continue to act on your behalf at that institution. The bank would have no way of knowing that he or she no longer had authority to do so. Nor would the bank be liable for any unauthorized transactions, if it was not provided proper notice.