Illinois Powers of Attorney

All attempts are made to provide accurate information. However, nothing contained herein should be relied upon as legal advice or legal authority. Nothing contained herein should be substituted for the advice of competent legal counsel.

Most of us will suffer some sort of disability or incapacity during our lifetime. Failure to plan for these contingencies in advance can prove costly in lost opportunities, excessive expenses, and lost time. Proper planning, however, will avoid many of the legal and economic difficulties that are sure to arise. One way of plan for incapacity or disability is to execute a power of attorney.

A power of attorney ("POA") is a written document in which you (the grantor or principal) authorize another individual (your agent or attorney-in-fact) to perform certain specified acts on your behalf. Your agent can be given the power to pay your bills or to handle your financial and personal affairs when you are unable to do so. A POA does not make your agent the owner of your property, although your agent may be given the power to transfer or purchase property on your behalf.

Incapacity or illness can occur to any of us at any time. During such times your agent can handle your personal affairs and make healthcare decisions on your behalf. By appointing an agent, you can also avoid guardianship proceedings.

A guardianship proceeding is the legal method used for declaring a person disabled or incompetent and for appointing a guardian to handle that person's business and financial affairs. A guardianship proceeding can be an expensive, time consuming, and humiliating experience.

You should exercise great care in selecting an agent. Give this power only to a person whom you trust completely. A relative or a close friend is often a good choice. Never give this power to someone you do not trust or who may have a conflicting interest. Do not put anyone in a position of having to choose between your interests and their own interests. Although a court will require your agent to choose your interests over his or her own, litigation is an unpleasant, expensive, and time consuming process.

You can divide the responsibility of agency among several people. You may wish to appoint a business associate to make business decisions, a banker to make financial decisions, and a family member to make medical and personal decisions. Most people, however, seem to choose their spouse to handle all decisions.

A POA may be general or specific. A general POA permits your agent to perform any act on your behalf. Generally it is not advisable to give such broad powers to anyone except your spouse. A specific POA authorizes your agent to perform only those acts specified in the document. Some of the powers that you may want to consider giving to your agent are the power:

Any adult (a person 18 years of age or older) who is not disabled or incompetent can execute a POA. You must be competent when you sign the document. Your POA is not valid if you are declared incompetent by a court of law before signing the document.

Your POA becomes effective when you sign the document and acknowledge it before a witness and notary public. It may also become effective on the happening of a specific event indicated on the document. For example, upon the certification by your physician that you are unable to take care of your own affairs ( Springing Power or Springing Power of Attorney).

· when the principal revokes the power, if the principal reserved the right to revoke it in the document;

Before September 16, 1979, a POA executed in Illinois automatically terminated if you became incompetent or disabled, making it useless when you needed it most. Since September 16, 1979, a POA executed in Illinois may be made "durable." This means that such a POA will remain effective even after you become disabled or incompetent. If you have such a durable POA and are declared to be disabled or incompetent by a court of law, your POA remains valid unless terminated by the court.

A durable POA will automatically terminate on the occurrence of any of the following events:

· as to the agent, when a court of law declares the agent to be disabled or incompetent (unless you appoint a successor agent);

· when the principal revokes the power, if the principal reserved the right to revoke it in the document;

Your agent may perform all the acts specified in the document (power of attorney) and therefore must always act with your best interests in mind. Consequently, your agent has a fiduciary relationship with you.

Your agent must always be prepared to show your POA to anyone who questions your agent's right to use it. Occasionally problems occur. A bank, title insurance company or a brokerage house may refuse to recognize the authority granted by a POA and may require additional proof of authority or the re-execution of your POA. This additional headache could be eliminated if property were held in trust. Remember, when property is held in trust, the trustee is much more than an agent. The trustee holds title to the property as trustee of the trust and your trustee's authority cannot be questioned.

There may be times when your agent cannot or will not serve. In such a case your POA can authorize that an alternate agent may serve. The alternate agent can then perform the act that would have been performed by your original agent.

The Illinois Probate Act formerly provided that any POA executed when you were competent remained in effect until a court declared you to be incompetent. This made your POA useless when you needed it most. In an effort to make powers of attorney more acceptable, this provision of the Illinois Probate Act was repealed and replaced by the Illinois Power of Attorney Act. The new statute provides that your POA continue until your death, unless the document indicates an earlier termination date. This applies even if you are adjudicated disabled and a guardian is appointed on your behalf. The Act also provides for:

· two statutory forms of powers of attorney (one for property and one for health care).

The Act became effective on September 22, 1987. It applies to all existing powers of attorney created on or after that date, subject to any contrary provisions included in the document. The Act even applies to a POA created outside of Illinois if either you were a resident of Illinois when you signed the document or the document provides that Illinois law is to govern.

Under the Illinois Power of Attorney Act, the mere execution and delivery of a POA does not impose an affirmative duty on your agent to act. If a power is exercised, however, your agent is required to use "due care" when acting on your behalf. Although your agent is liable for "negligent exercise," your agent is not liable for "any loss due to error of judgment."

Any person relying "in good faith" on a copy of the document is "fully protected" from lawsuits. A third person may, but need not ask your agent for an affidavit that you are alive and that the terms of the agency are in effect. Thus, unless a third person has actual knowledge that you are not alive or that your POA has been revoked, the Act protects a third person who relies on the document.

However, a third person must still determine that your agent is acting within the scope of the granted power. Since nothing in the Act requires a third person to honor a , a trust may be a better alternative to manage your assets during periods or incapacity.

The Act provides that upon your divorce or legal separation, your spouse has no authority to act on your behalf under any existing power of attorney. However, third persons are not required to ask for an affidavit certifying that your Spouse's powers are in effect.

In the event that you lack the capacity to alter or revoke your power of attorney, a court may remove your agent and appoint a guardian if it finds that your agent is not acting:

"for the benefit of the principal in accordance with the terms of the agency or that the agent’s action or inaction has caused or threatens substantial harm to the principal’s person or property in a manner not authorized or intended by the principal."

Without a court order, however, a guardian has no "power, duty, or liability" with respect to property or health care matters covered by your power of attorney.

The purpose of these forms is to provide a standard that you and your agent will find easy to use and that third parties will be encouraged to honor.

Each form begins with a "Notice" which must be printed in block capital letters and which is part of the form explaining to the layman the purpose of the form and some of its legal effects. Throughout the form are other explanations (which also must be printed in capital letters), intended to permit the layman to complete the form without the aid of an attorney. However, some of the powers granted are so complex and difficult to understand that, in the opinion of this writer, neither of them should be executed or altered by a layman without the advice of an attorney.

Instead of setting forth exhaustively all powers of your agent, the Short Form for Property sets forth 15 categories of powers, such as "real estate transactions," "financial institution transactions" "safe deposit box transactions" and the like. Statutory definitions of these categories are printed on the reverse side of the form.

Unless the form is modified, you agent has all the defined powers of all the categories. Any category may be eliminated by striking it from the form and any power within a category may be limited or expanded by completing the appropriate spaces found on the form. Some of these categories are not typical, for example, unless the category is stricken your agent has the power to conduct all types of futures and options transactions for you. Unless modified, the form provides that your agent is entitled to compensation and may delegate his powers.

There are many powers that may affect your estate plan. For example, under the statutory category "(n) Estate transactions," your agent has specific authority to collect and receipt for, and to "renounce" or "disclaim," property payable to you, to establish a revocable trust for your benefit that is distributable at your death to your estate, and to "assert any interest in and exercise any power over any trust, estate, or property subject to fiduciary control."

Under this category of powers, however, your agent may not "make or change a will" and may not exercise your power to revoke or amend, or compel a trustee to pay income or principal to you agent, without specific authority added to the statutory form, specifically referring to the power. Likewise, your agent is given broad powers under categories "(f) insurance and annuity transactions" and "(g) retirement plan transactions" with respect to insurance and annuity contracts and employee retirement plans.

All statutory powers are subject, however, to an overriding warning that none of the powers may be used to make gifts of your property, to exercise powers to appoint to others, or to change any beneficiary succeeding at death to an interest of the principal. These powers must be specifically granted, and there is space provided on the statutory form for adding them.

Thus, although your agent may collect an inheritance on your behalf, your agent may not exercise a power of appointment or withdrawal unless specifically authorized in the form. Likewise your agent may terminate an insurance policy in order to collect its cash value or may "make rollover contributions from any retirement plan to other retirement plans or individual retirement accounts," but your agent may not change the beneficiary under an insurance contract or retirement plan without specific authority in the form.

The Short Form POA for Health Care permits you to delegate personal and health care decisions in case you becomes disabled. Your POA for health care may extend beyond your death to permit anatomical gifts, autopsy, or disposition of remains. The statutory form gives your agent broad powers to access your medical records and make health care decisions on your behalf including the power to authorize the withdrawal of food, water, and other life-sustaining measures. Remember, neither your attending physician nor any other health care provider may act as an agent under a POA for Health Care.

As you can see, planning for disability or incapacity is both necessary and somewhat complicated. For a further explanation of a POA for your particular situation, you should consult with your attorney. Only your attorney should prepare a POA.

Act: The Illinois Power of Attorney Act, 755 ILCS 45/1-1 to 45/4-12, effective September 22, 1987.

Agent: A person who represents and acts for another under a contract of agency; a person who undertakes to transact some business or to manage some affair for another by the authority and on account of the latter and to render an account of it.

Attorney-in-fact: ("Attorney" is defined in a general sense as an agent or substitute, or one who is appointed and authorized to act in the place or stead of another.) "Attorney-in-fact" is defined as a private attorney or a designated person authorized by another to act in his place and stead, either for some particular purpose, as to do a particular act, or for the transaction of business in general, not of a legal character.

Bondsman: A person or corporation who undertakes to pay money in the event that the personal representative or other fiduciary fails to live up to his obligations and duties. See "Surety."

Disabled person: A person 18 years old or older who (a) because of mental deterioration or physical incapacity is not fully able to manage his person or estate, or (b) is mentally ill or developmentally disabled and who because of his mental illness or developmental disability is not fully able to manage his person or estate, or (c) because of gambling, illness, debauchery, or excessive use of intoxicants or drugs so spends or wastes his estate as to expose himself or his family to want or suffering. See "Incompetent."

Fiduciary: The person or party who holds property in trust for another or who has a special relationship of trust to another. The personal representative is a fiduciary.

Grantor: The person by whom a grant is made. "Grant" denotes a transfer of property or a transfer of power.

Guardian: A person appointed by the court to have continuing and general supervision over the financial affairs of one not legally competent to manage them by himself, such as a minor or disabled or incompetent person. See "Guardian of the Person" and "Guardian of the Property."

Guardian of the Person: A guardian who cares for the physical needs of a minor or disabled person. See "Guardian."

Guardian of the Property: A guardian who cares for the property of a minor or disabled person. A Guardian of the Property is also known as a Guardian of the Estate. See "Guardian."

Incompetent: Any person who, because of insanity, mental illness, mental retardation, old age, physical incapacity, or imperfection or deterioration of mentality, is incapable of managing his person or estate and any person who, because of gambling, idleness, debauchery, or the excessive use of intoxicants or drugs, so spends or wastes his estate as to expose himself or his family to want or suffering. See "Disabled Person."

Minors: Persons of the age of 18 shall be considered of legal age for all purposes, except that of the Illinois Uniform Gifts to Minors Act, and until this age is attained, they shall be considered minors.

Minors: Uniform Gifts to Minors Act: A "minor" is a person who has not attained the age of 21 years.

Personal property: All assets other than land and those things permanently affixed to the land. It is also known as personalty.

Personal representative: The person named in a decedent’s will or determined by law, and then appointed by the court, to manage the decedent’s estate during probate. The term "personal representative" is now generally used in place of executor or administrator. See "Representative."

Principal: The employer or constitutor of an agent; the person who gives authority to an agent or attorney to do some act for him.

Power of attorney: An document authorizing another to act as one’s agent or attorney.

Representative: Includes executor, administrator, and guardian. See "Personal representative."

Springing Power: A power that comes into being upon the occurrence of a stated event. See Springing Power of Attorney.

Springing Power of Attorney: A power of attorney that comes into being upon the occurrence of a stated event. See "Springing Power."

Surety: A person or corporation who undertakes to pay money in the event that the personal representative or other fiduciary fails to live up to his obligations and duties. See "Bondsman."

Trust: A legal entity, created either during a person’s lifetime (an intervivos trust) or by his will (a testamentary trust), which transfers property to someone (called the Trustee) for the benefit of persons designated as beneficiaries in the trust document. See "Trustee."

Trustee: The trustee or any successor trustee of a trust, whether appointed by or pursuant to the document creating the trust, by order of court or otherwise, and including an individual or a corporation qualified to administer trusts in this state. See "Trust."