The risk of disability exists for all of us, whether from illness, injury or aging. So, too, as society has become more mobile, is there an increased possibility that we may be away and unavailable to address our personal and financial affairs. Disability and unavailability raise numerous issues, from managing assets to arranging proper care for persons with special needs. One means of addressing those issues is the use of a Power of Attorney.

A Power of Attorney is a document that authorizes one person, known as an Attorney-in-Fact, to act as an agent for another person, known as the principal. The document empowers (but does not require) the agent to act for the principal within the scope of the specific authority granted in the document. If the principal becomes disabled or incompetent, the power of attorney will remain effective only if it states that it is intended to do so. Such Powers are known as "durable." However, in Connecticut, the appointment of a Conservator by a probate court for the principal's property operates as an automatic termination of the Durable Power of Attorney.

Connecticut statutes permit the use of a standard power of attorney form that lists specific powers granted to the agent. The principal, however, may want to add additional powers to the standard form. For example, if the principal has a revocable trust that is to be the main tool for managing his assets during his disability, the power of attorney should expressly authorize the agent to transfer assets into the trust.

The principal may want to allow the agent to have limited gifting powers in order to continue or implement a program of family gifts. This power may be limited to certain donees, such as children or grandchildren, and specific amounts, such as the annual gift tax exclusion amount. It is important to remember that the standard language of the statutory form cannot be relied on to authorize such gifts. Too often, a holder of a Power of Attorney incorrectly assumes that the power authorizes him or her to transfer the principal's property by gift. Eventually, the agent confronts a need to get the property back or make amends for acting without authority.

A principal may designate more than one agent under a power of attorney. It is often useful to name two or more agents who may act separately on behalf of the principal, so that if only one agent is available, he will have the full authority to act. This may be especially helpful if the principal wants to name multiple agents, such as several adult children, but the agents are geographically scattered and may not be able to act jointly on the parent's behalf.

Connecticut allows the use of "general" and "springing" powers of attorney. A general power of attorney becomes effective as soon as the document is signed. This means that, once the document is delivered to the agent, the agent has the legal power to act on behalf of the principal at once, even if the principal is not disabled.

A springing power of attorney becomes effective only when a specified contingency occurs. The contingency usually specified is the disability or incompetence of the principal, as certified by a physician or mental health professional. Some practical difficulties in using a springing power of attorney stem from the contingency itself. For example, how recent must the certification be? If the principal wishes to revoke the power, must he obtain certification that he has recovered his competency? If the power must be used in an emergency, and a certification of incompetency has not yet been obtained, can the agent obtain it quickly enough to act? Such practical questions make the springing power a complicated alternative to the general power.

An important practical concern with powers of attorney is that they may be considered by third parties to become "too old". A third party who is asked to rely on an agent's authority may question the validity of a power of attorney that was executed several years earlier. The third party may question whether the power of attorney was revoked during that time, or whether it has been superseded by a subsequent power of attorney. Therefore, it is useful to execute new powers of attorney with regularity. It is important, therefore, for the agent to communicate with the third parties (such as banks and brokerage houses) as soon as possible after the power becomes effective.

Another practical problem sometimes arises with governmental bodies (the IRS and Social Security Administration), banks and brokerage houses. These institutions may insist that they can honor only their own power of attorney forms and will refuse to respect other forms presented by agents. Thus, regardless of the validity of a power of attorney custom prepared for a client, it may make practical sense to execute the institutions' power of attorney forms as well, to ensure that the agent can act with respect to accounts at those institutions.

Institutional forms should be examined carefully before they are signed, because they may lack the requisite language of durability or contain other restrictions that the principal needs to understand. In the case of banks in Connecticut, it may also be useful to consider the "durable power of attorney bank account", which can be established with a simple bank form, and may be a better alternative to naming a client's child on a joint account.

One significant drawback of a power of attorney is that an agent is not held to the same procedural requirements of accountability that apply to some other fiduciaries, such as trustees or conservators. An agent is not required to submit accounts to the principal or to the Probate Court, although a principal may petition the Probate Court to require the agent to provide an accounting. If the principal is incompetent, however, he will obviously be unable to bring an action for an accounting. In that case, the principal will be protected only if some other person (such as someone who applies to act as the principal's conservator during life, or who serves as executor after the principal's life) petitions the court to compel an accounting.

It is important, therefore, that the person acting under a Power of Attorney read the Power of Attorney carefully and maintain complete records of all that he or she does by virtue of the power.