Powers of Attorney: What You Need to Know

You find out your customer is set to be on a European vacation the same day as the closing on her house and the customer presents you with a Power of Attorney or POA. Although POAs are common, its important to review each one carefully prior to accepting it for your transaction. Here are some things to keep in mind during your review.

• “Power of attorney" means a writing or other record that grants authority to an agent to act in the place of the principal, whether or not the term power of attorney is used. [Wis. Stat. §244.02(9)]. In other words, it allows the agent to “step into the shoes” of the principal for specific actions listed in the POA. The principal can grant the agent authority for one action, such as to sign on her behalf in a real estate transaction or a multitude of powers such as managing all the principals’ financial affairs. When reviewing a POA, it is important to make sure it grants the power necessary to complete the transaction.

• A principal can decide to name two or more people to serve as coagents who can act independently. This is common when the principal wants to have two adult children as her agents. A successor agent can also be appointed but cannot act until the primary agents have resigned, died, become incapacitated, are no longer qualified to serve, or have declined to serve.

• A POA becomes effective immediately upon the principal signing unless he or she outlines otherwise. If properly notarized, the signature of the principal is considered genuine by statute. In some cases, it becomes effective upon the principal’s incapacity which is often determined by a physician or judge. Unless otherwise stated, a POA is “durable” which means it is not terminated by the principal's incapacity. However, the terms should be carefully reviewed to determine who has the authority to declare the principal's incapacity.

• Unless given express permission in the POA, an agent can not use their powers for self-dealing, gifting, or amendments to the POA. Carefully review situations involving an incapacitated principal for self-dealing behaviors.

• POAs terminate upon death of the principal or other event stated in the writing. When this happens, the agent’s authority terminates as well. If a principal wishes to invalidate a previous POA, he or she must does do so explicitly in the new POA.

• If you come across an out of state POA, you will need to make sure it complies with the laws of the state in which was it was executed. First American Underwriters are happy to assist you with determine different state requirements.

Not all POAs are created equal, so whenever you have a question about the validity of one you are presented with, please reach out to your First American Underwriters for guidance.

Written by Allison Kalweit, Underwriting Associate