What Is a Power of Attorney?
A power of attorney is a simple but powerful document that grants a person the authority to act on someone else’s ("principal’s" or "donor’s") behalf. It is considered an instrument of agency in which the principal confers decision-making abilities to another person or persons usually with respect to financial matters. A power of attorney comes into play when a principal wishes to entrust someone with special nonfinancial legal authority. There are two types of power of attorney: general and specific (or limited). A general power of attorney grants broad authority to the bearer to make almost all decisions on behalf of the principal. A specific power of attorney authorizes the bearer to make a limited number of decisions for a limited period of time.
In addition, a principal can designate one of two types of powers of attorney: springing or nonspringing. A springing power of attorney takes effect only after the principal no longer wants to be responsible for himself or herself , due to incapacity. The lawyer drafting this power of attorney often designates a physician or psychiatrist to determine when a designated third party should act on the principal’s behalf. In contrast, a nonspringing power of attorney takes effect immediately after it is signed by the principal (known as the execute date). This type of power of attorney is used frequently by people who travel a lot for business or leisure.
Legislation passed in Tennessee in 2004 allows Tennesseans to use a statutory form of power of attorney that has been approved by the state legislature to grant certain powers to financial and healthcare agents. A Tennessee financial power of attorney entrusts the agent with the authority to handle a broad range of financial matters on behalf of the principal. This power of attorney can be used as soon as it is signed by the principal (unless a future date is mentioned) and stays in effect until the principal is declared mentally incompetent by a court. This power of attorney can also be revoked at any time so long as the principal is mentally competent at the time of revocation.
Tennessee Power of Attorney Types
There are different types of power of attorney documents. A general power of attorney provides blanket financial powers to the person you designate (known as an agent). If you lose capacity, your agent remains your agent. A durable power of attorney does the same thing as general power of attorney, but may continue even if you become incapacitated under certain circumstances. A limited power of attorney grants the agent specific powers. A healthcare power of attorney remains in effect even if the principal loses capacity.
Power of Attorney Legal Requirements in Tennessee
In Tennessee, a power of attorney (POA) can be signed by the principal – the individual designating another to act on their behalf – before it is considered valid. The POA document must be at least two pages, clearly stating on the first page that it is a POA. On the second page, the signature of the principal must be notarized and dated. The document also requires language allowing the principal to specifically permit any action not allowed by law for a POA.
At least one witness must also sign the document, and that witness cannot be the attorney-in-fact or agent under the POA. It’s also possible for a POA to be revoked by the signature of the principal. In this case, the signature must be notarized.
Steps to Creating a Power of Attorney in Tennessee
To create a power of attorney in Tennessee, you must use specific form documents. If you have a preprinted form, you may already have the information you need for your standard power of attorney. You can find templates for medical care and financial matters on the Tennessee Secretary of State website. If your preferred power of attorney form is not available, or you would like to create a customized version, you can do so by following the steps outlined below.
1. Select your agent
An agent is an individual who will act on your behalf. This individual must be trustworthy and reliable because you are granting them broad powers by completing a power of attorney.
2. Choose your power of attorney
There are multiple types of powers of attorney in Tennessee, but two of the most common types are durable and medical powers of attorney. A durable power of attorney allows the named agent to conduct financial transactions, such as banking, purchases, and filling out taxes. A medical power of attorney is a document that allows a trusted individual to make medical decisions on your behalf. Both can be created using preprinted power of attorney documents in Tennessee.
3. Fill out the form
Once you have selected your power of attorney, fill out the necessary form completely and in full. In some cases, you may need to sign your form in the presence of a notary public. If you are creating a power of attorney for medical purposes, confirm that the form you complete is appropriate for medical decisions.
4. File the documents
Most often, you will not need to file your power of attorney with the court system. Instead, you should give copies of the power of attorney documents to your agent, financial institutions, and other parties who may need to have a copy of the documents on file.
5. Revoke a power of attorney
If you created a power of attorney at any point and it is no longer necessary, you can revoke the form by marking it inappropriate locations or crossing out specific sections of the document. It is also recommended that you complete a Revocation of Power of Attorney form to clarify your position that the document is no longer valid.
The Agent’s Role and Restrictions of Powers
As an attorney who focuses on wills and estates, I know that a Power of Attorney is a powerful estate planning tool. By signing a document authorizing an agent, a person can get much of the authority of a conservatorship without the legal expense and delay.
A Power of Attorney delegates the authority – but it also imposes responsibility. The agent has limited powers and responsibilities to the principal. Tennessee Code Annotated Section 34-6-107 governs an agent acting under a Power of Attorney.
The agent shall act in good faith and "solely for the benefit of the principal." (T.C.A. § 34-6-107(1)). It’s clear from this section as a whole that the owner has only granted the agent the powers strictly necessary to see that his or her personal and financial affairs are handled. This provision would most likely not be an avenue for liability unless the actions of the attorney-in-fact were clearly not in the best interests of the principal.
The agent shall not do anything which "is likely to result in a substantial reduction of the principal’s resources that otherwise would enable the principal to care for the principal’s self , spouse, or dependent." (T.C.A. § 34-6-107(6)). There are two things to notice here that show how close the agent must watch himself. First, the language "likely to result" means that even if the principal could still live off of what remains, the agent cannot cause a reduction of the principal’s money that is more than the Court thinks the principal needs to provide for their care. Second, the agent cannot indulge himself in luxuries using the money of the principal. The Court does not want the agent lavishly spending the principal’s money on himself.
The agent shall not delegate power entrusted to the agent. (T.C.A. § 34-6-107(15)). In other words, the agent cannot hand the authority the principal has given him to someone else. It may seem tempting, and some people might even try to encourage the agent to delegate, but the law would not look kindly on an agent who delegated his authority to others.
How to Update or Revoke a Power of Attorney
In order to revoke power of attorney (POA) in Tennessee requires a few steps. You must first inform the person to whom you made the grant of the revocation. Then, revocation must be made in writing. Then, the written notice of the revocation must be delivered to your agent or the agent’s representative. In addition, once the revoking party informs the agent by delivering a written notice of revocation, the agent must not exercise any authority under the existing POA and must provide a copy of the notice of revocation to any person that has or intends to have dealings with the agent. Although not legally required, if the original granting party remembers to provide copies of the revocation to all institutions where your documents are kept, it may help to end future conflict or pressing on an agent who may want to force the POA to continue. For example, a bank where an account was held.
There are two types of templates available on the TN Supreme Court Website to revoke a POA. The Revocation of Power of Attorney (Form H) or a Revocation of Health Care Power of Attorney (Form I).
Power of Attorney Errors to Avoid
Mistake 1 – Failure to State an Effective Date – Many people want a power of attorney that is effective immediately. However, if an immediate grant of authority is not what you really intend, you should either: In our society, many people are fearful of the power they grant through a power of attorney. In an effort to calm these fears, some people choose to create a power of attorney with a future effective date, but forget to specify a general or specific triggering event. Or worse yet, they fail to even put down a future effective date. This means the document is in effect immediately, allowing their agent to take action as soon as it is signed. Customers who ask for a "springing" power of attorney need to specify when the springing event takes place. A springing power of attorney is one that has no effect until the triggering event occurs, and can be limited to certain actions or property.
Mistake 2 – Failure to Provide a Liability Waiver – As a convenience to financial institutions, the Tennessee Uniform Power of Attorney Act allows the financial institution to choose to accept or reject a power of attorney presented to them. However, in 2018, the Tennessee legislature updated the law, making it clear that a financial institution may not reject the power of attorney if the power of attorney meets certain clear guidelines. However, if they fail to follow those guidelines, they are protected from liability. The types of liability waivers permitted under the law include: These waivers help increase willingness by financial institutions to accept powers of attorney without interpreting them too broadly.
Mistake 3 – Failure to Address Revocation – It is essential to discuss under what circumstances your power of attorney will be revoked. Powers of attorney can be terminated by the death of the principal, or by the death of the agent. In the latter case, some people would want an executor to manage the principal’s property, but fail to provide for this circumstance. A broad statement such as "this power of attorney shall become void if the attorney-in-fact resigns" is often left out.
Mistake 4 – Non-specific Powers – Tennessee law allows several types of powers, including those regarding real property, banks, insurance, claims, businesses, patent, or similar property. However, today’s world has many more powers that may be needed, such as digital property, social media accounts, and especially blog accounts, which should be specified in a power of attorney.
Frequently Asked Questions
Frequently Asked Questions Regarding Tennessee Power of Attorney Requirements
When is a power of attorney effective in Tennessee?
In Tennessee, a power of attorney, if signed and dated by the principal, is useful upon delivery. For example, suppose that Laura Terry (principal) signed a medical power of attorney and gave it to her friend Chris (agent). Chris gets a call one evening from Laura who is being admitted to the hospital and therefore wants to go into effect. To make it effective, Chris simply has to deliver the signed document to Laura’s doctors.
Is a power of attorney effective upon signature in Tennessee?
Not always. When signing a power of attorney, the principal may select an effective date. If so, the power of attorney is not effective until the principal writes the date on which the power of attorney becomes effective. When the power of attorney contains this language, it serves as a springing power of attorney. This means that Chris will have to wait until the effective date and deliver the original document to Laura’s doctors on or after that date.
Power of attorney in Tennessee without notary?
Yes. An acknowledgment before a notary public or another individual authorized to administer oaths is not a requirement for a power of attorney to be legally effective in Tennessee. However, if the document is going to be used for real estate purposes, such as when selling a home, the document must be acknowledged before a notary public or another individual authorized to administer oaths .
Does a power of attorney need to be recorded in Tennessee?
No. A power of attorney does not need to be recorded in Tennessee. However, when a power of attorney is used for real estate purposes and the power of attorney will be recorded on the real estate deed or mortgage, then the power of attorney must be acknowledged before a notary public or another individual authorized to administer oaths.
Can a principal revoke a power of attorney in Tennessee?
Yes. A principal can revoke a power of attorney at any time provided he or she is competent. When a principal wishes to revoke a power of attorney, the principal should sign a written notice of revocation. In this notice of revocation, the principal should identify the power of attorney that he or she wishes to revoke.
A notice of revocation signed and dated by the principal will serve as a valid revocation in Tennessee. However, if the power of attorney has already been delivered, the notice of revocation should be delivered to the agent and third parties that the agent has disclosed the power of attorney to in the past.
How many witnesses are required on a power of attorney in Tennessee?
Unless the power of attorney is being used for real estate transactions in which case two witnesses are required, only one witness is required in Tennessee.