What You Need To Know About Power Of Attorney
by Bill Douglas, Individual Annuity Compliance Manager
The power of attorney is an important part of financial planning for many clients. A power of attorney is a legal instrument an individual uses to delegate legal authority to another person or persons to act on his/her behalf.
The person in the power of attorney who is delegated with the authority to act on behalf of another person is considered the "agent" or "attorney in fact." The person granting the authority is commonly referred to as the 'principal."
Why Establish A Power Of Attorney?
Generally, a person establishes a power of attorney to prepare for situations when that person is unable to act on their own behalf, perhaps due to absence or becoming incapacitated. In some cases a power of attorney is set up as a matter of convenience, so that the principal doesn't need to attend to certain matters.
If a person becomes unable to manage personal affairs or business, in the absence of a power of attorney, the court may need to appoint one or more people to act for that person. With a power of attorney, the person chooses who will act and is able to define the agent's authority and limits, if any.
Can The Agent Or Attorney In Fact Do Anything With A Power Of Attorney?
There are generally two types of power of attorney: a "general" power of attorney, and a "special" power of attorney.
A general power of attorney provides the attorney-in-fact with broad powers. A general power of attorney is usually used to allow the attorney-in-fact to handle all or many of the affairs of the principal while the principal is unable to do so.
Examples include the following:
- Handling bank transactions
- Handling US securities transactions
- Buying and selling property
- Purchasing insurance coverage
- Settling claims
- Entering into contracts
- Exercising stock rights
- Filing tax returns
- Handling matters regarding governmental benefits
- Disclaiming interests, i.e. estate planning strategies to avoid estate taxes
- Making transfers to revocable ("living") trusts
A special power of attorney authorizes the attorney-in-fact to do one or more activities or make specific decisions while the principal is unable to do so.
How Long Does A Power Of Attorney Last?
A power of attorney lasts as long as stated in the power of attorney. However, at times the authority is not given to the attorney-in-fact to operate on behalf of the principal unless or until a qualifying event occurs or is in place, for example, in case of the principal's mental incapacity, or if the principal is unavailable, etc.
A power of attorney may be made a "durable" power of attorney. A durability provision allows the power of attorney to stay in effect even if a principal becomes mentally incompetent due to sickness or accident. In such case, the power of attorney often requires certification by a physician of such mental incapacity.
A power of attorney also typically contains a revocation provision that notes the revocation rights of the principal to terminate the power of attorney agreement. A power of attorney automatically terminates upon the death of the principal.
What Annuity-Related Activities Involve A Power Of Attorney?
The Standard's Annuity Department generally sees the following types of activities that involve a power of attorney, as well as some special circumstances:
- Moving money in or out of an annuity or an account within an annuity
- Changing personal information, e.g., change of address
- Beneficiary designations or changing beneficiaries
- Filing a claim
- Settling a claim
What Do We Do When A Power Of Attorney Is Involved?
We go through a very detailed process when a power of attorney is involved, including the following steps:
- Request – All requests involving a power of attorney must be in writing
- Power of attorney document – We must have:
- The original power of attorney document; or
- A photocopy that has been certified by a notary public as a true copy of the original power of attorney document; or
- A photocopy that a lawyer (who represents the principal or attorney-in-fact) certifies, in a letter to us, on the lawyer's letterhead, that the copy is a true copy of the original power of attorney document.
- Policyowner information – We verify that policyowner information matches our records.
- Principal's signature – We verify that the principal's signature on the power of attorney document matches what we have on file.
- Signature of attorney-in-fact – Review signature to ensure it meets our standards.
Note: Requests by the attorney-in-fact must be in one of the following formats:
- [policyowner name] by [attorney-in-fact name], attorney-in-fact
- [attorney-in-fact name], attorney-in-fact for[policyowner name]
- [policyowner name] by [attorney-in-fact signature], POA
- [attorney-in-fact signature], POA for [policyowner name]
- Power of attorney type – We will determine the type of power of attorney (e.g., general, special) and identify whether or not the request is in accordance with the power of attorney document. If we have any doubt, we will always run this by internal counsel.
- Status of power of attorney – We will verify if the power of attorney is still valid. Note: The power of attorney is in effect only while the policyowner is alive.
- File the POA – We will place the power of attorney document(s) on file.
- Attorney approval – Depending upon the type of request we receive (e.g., change of beneficiary designation), we will often send it to internal counsel for review and approval to proceed.
- Affidavit – We will prepare an "affidavit and indemnity agreement" and mail it to the attorney-in-fact.
- Proceed with request – Upon receipt of the signed affidavit, we will proceed with the request.
What Can I Do To Help The Process Move Smoothly?
If you become aware of a power of attorney in place, you can alert your client and the attorney-in-fact of our requirements, noting that we will:
- Need appropriate power of attorney documents with any request sent in by the attorney-in-fact (original or certified copy).
- Review to power of attorney to verify that is still is in effect and provides the authority to the attorney-in-fact that corresponds to the request.
- Require that the request by the attorney-in-fact be in a format we will approve (noted above).
- Send an affidavit for signature which must be returned to us prior to taking action upon the request.
When a power of attorney is in place for your clients, keeping them informed about our process helps us promptly meet their needs. If you have questions about specific situations or need further information, please contact our Annuity Specialists at (800) 378-4578.