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by Bob Ciancola, an Arizona attorney practicing in business transactions, tax law and estate planning. (reprinted with author’s permission)

A power of attorney is a grant by a principal to an agent of powers to control assets belonging to the principal.

The power can refer to specific assets, such as a bank account (most banks have their own forms for this purpose), in which case it is a special power of attorney, or can be granted for all of the principal’s assets (a general power of attorney). The powers granted to the agent can be very broad (“to act in my name, place and stead in any way which I could do, if I were personally present, to the extent that I am permitted by law to act through an agent”) or very narrow (“to manage my real property located at 2828 North Central Avenue and for no other purpose”).

A durable power of attorney can take effect immediately, or it can be written now to take effect only in the event the principal later becomes incapacitated (a springing power). The power can appoint a single agent, two or more acting jointly, or two or more acting sequentially, with the second agent granted power only if the first agent is unable to act.

A.R.S. § 14-5501 sets forth the general requirements for a valid power. The instrument creating the power must be in writing, contain language clearly indicating the intent of the principal to grant powers to the agent, be signed by the principal, witnessed (by someone other than the agent, the agent’s spouse or the agent’s children) and acknowledged by affidavit of the witness before a notary public. In order to constitute a durable power of attorney, the instrument must use either of the following provisions (A.R.S. §14-5501(B)):

1. “This power of attorney is not affected by subsequent disability or incapacity of the principal or lapse of time.”

2. “This power of attorney is effective on the disability or incapacity of the principal.”

Powers of attorney may be granted by entities, such as corporations or LLCs, as well as natural persons. A.R.S. § 14-5501(D) provides a form for the acknowledgment and affidavit.

Arizona has strict and detailed requirements that agents acting under a power of attorney do so only in the “best interest” of the principal. “Best interest” is defined as solely for the principal’s benefit. A.R.S. § 14-5506(F) imposes a duty on the agent to use a power only in the best interest of the principal and not for the agent’s benefit. A violation of this duty can subject the agent to severe penalties, including criminal prosecution for theft, a civil action in which treble damages are recoverable, and forfeiture of any inheritance the agent might otherwise receive from the principal (A.R.S. § 46-456). Any authority of the agent to act in the agent’s benefit or not in the best interest of the principal must be specifically set forth in the instrument and separately initialed by the principal and the witness. For example, an Arizona resident wishes to grant a durable power of attorney to his son, who lives in Oregon. It might be desirable to allow the son to stay in the principal’s home if he is in Arizona exercising the power. Such a provision should be specifically set forth in the instrument and initialed because it grants a power which is not solely in the principal’s interest.

A power of attorney may be revoked at any time during the principal’s capacity by an instrument of revocation, by orally informing the agent of its termination, or by executing a new power. Because it is easily revoked, A.R.S. § 14-5505 provides that a third party will be held harmless and may rely on an affidavit provided by the agent to the effect that, to the best of the agent’s knowledge, the power has not been revoked and is currently in effect.

A power of attorney can be granted only by a principal who has legal capacity to act in his own behalf. Generally, this means that the principal must be of legal age (or be acting through a legal guardian); have the mental capacity to understand what he is doing and appreciate the consequences of it; and not be a vulnerable adult subject to the undue influence of the agent. In the event the grant of a power is challenged for lack of capacity, the burden of proof is on the agent in a criminal proceeding to prove the principal had capacity by “clear and convincing evidence.” In a civil action, if a party is able to show that the principal was, at the time of granting the power, a “vulnerable adult”, the agent must show capacity of the principal under the clear and convincing standard. Otherwise, the agent has the burden of showing capacity by a preponderance of the evidence.

A power executed by a principal lacking capacity is void.

Powers of attorney are automatically canceled in the event the principal becomes incapacitated after executing the power unless the document specifically provides that it will survive the incapacity of the principal (this is called a durable power).

All powers of attorney cease to have any effect upon the death of the principal.