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Power of Attorney - When Does It Terminate?

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What is a power of attorney?

A financial power of attorney is an instrument that allows one person to act for another in a variety of financial matters. The person making the document is called the principal. The person designated to act for the principal is called the agent or attorney-in-fact.  It is a relationship of special confidence and trust.  Since a power of attorney can grant significant power, it is important that an agent understands when their authority ends.  Sometimes the actual document states when that happens. Other times it is by the occurrence of a particular event or event by operation of law.

When does a power of attorney terminate?

A power of attorney terminates when any of the following events occur:

(1) The principal dies.  This is arguably the most common event of termination.  It is also the most misunderstood as agents often transfer funds or pay bills of the deceased principal after death.  Here in the state of Ohio, courts regularly hear cases filed by a principal’s heirs seeking to recover funds that disappeared after the principal’s death through the use of a power of attorney. There is a very limited exception to the general rule. If the power is specifically coupled with an interest, it may survive death of the principal.  For example, courts have held that a managing partner can sign a certificate of registration of a partnership on behalf of a deceased partner after her death.  Also, if an agent does not have actual notice of the principal’s death, then actions taken in good faith on behalf of the principal after death are legal and binding.

(2) The principal becomes incapacitated, if the power of attorney is not durable A power of attorney is considered durable if it states that is not affected by the disability of the principal. Without this specific language, the power of attorney ends when the principal is not able to make decisions due to mental or physical incapacities.  If, however, the agent does not have actual notice of the principal’s incapacity, then actions taken in good faith on behalf of the principal are legal and binding.

(3) The principal revokes the power of attorney.  To accomplish this, the principal should serve his agent with a written notice that the agent’s powers are terminated.  Also, if the power of attorney was recorded with the county recorder’s office, then notice of the revocation must be filed with the recorder as well. The execution of a new power of attorney does not revoke a prior power of attorney automatically unless the new document specifically provides for this. If a guardian is appointed for the principal, the guardian has the ability to revoke all or any part of the power and authority of the agent.
 
(4) The power of attorney provides that it terminates.  It is rare, but sometimes a power of attorney actually sets an expiration date. 
 
(5) The purpose of the power of attorney is accomplished.  This occurs when the power of attorney is used for a specific transaction.  For example, a principal may name an agent to sign closing documents for one real estate transaction.  Once the transaction is complete, the powers expire.
 
(6) If the agent dies, becomes incapacitated, or resigns, and the power of attorney does not provide for a subsequent agent to act under the power of attorney.
 
(7) If the agent is married to the principal and a divorce or separation action is filed with a court, unless the power of attorney states that such an action will not terminate the authority.
 

"It is important for an agent to understand when a power of attorney expires so that he or she does not take action which is no longer authorized.  Otherwise, the agent could be responsible personally for the performance of any obligations undertaken on behalf of the principal or liable to the principal for damages."

If you have questions regarding laws in the state of Ohio related to the power of attorney or your authority to act as an agent, the lawyers at Laribee & Hertrick in Medina County, Ohio can assist you.
 

Contact an Attorney in Medina, Ohio

This article is intended to provide general information about the law. It is not intended to give legal advice.  Readers are urged to seek advice from an attorney regarding their specific issues and rights. To contact an attorney at Laribee & Hertrick, LLP, request more information about our legal services today.

 


 
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