Under New Jersey law, an individual creates a power of attorney (POA) by executing a written instrument with the proper information. The person creating the legal document, or principal, must provide their name and the name of their agent. The agent can be another individual, a set of individuals or a qualified institution such as a bank. Each agent becomes an attorney-in-fact to perform specific acts on behalf of the principal.
Different Types of Power of Attorney Documents
Types of powers of attorney in the state of New Jersey include:
- Durable power of attorney: Agent handles all or part of the principal’s personal and/or business dealings. A durable power of attorney stays in effect even if the principal becomes incapacitated due to age, disease or intoxication and cannot make their own decisions.
- General power of attorney: Agent handles all or part of the principal’s personal and/or business dealings. This power of attorney becomes void when the principal becomes incapacitated.
- Limited power of attorney: Agent appointed for a limited duration or a specific purpose.
- Medical power of attorney: Agent appointed to handle the principal’s health care decisions.
- Minor (child) power of attorney: Agent can make legal decisions on behalf and for the benefit of a minor. Decisions may cover education, health care, caregiving, financial, legal and travel concerns of a minor.
- Tax power of attorney: Agent can act for tax matters only.
- Vehicle power of attorney: Agent has power to sell, fix or otherwise deal with the principal’s motor vehicle.
What a POA Should Contain
A POA document should contain the name of the principal, the name of the agent/s, the duration of the power of attorney, and the type of power that the agent possesses. The document must be in writing, signed, acknowledged and notarized. There is no witness requirement. As an example of what a more extensive power of attorney looks like, a general POA usually contains clauses that confer upon the agents:
- Power to make payments and collect debts.
- Power to acquire, sell and lease personal property.
- Power to acquire, sell and lease real estate.
- Management powers.
- Banking powers, such as the power to withdraw money from an existing account, open a new account or get a loan.
- Powers regarding motor vehicles, such as selling or modifying the motor vehicle.
- Powers regarding tax matters.
- Powers regarding safe deposit boxes.
- Gift-making powers.
- Lending and borrowing powers.
- Powers regarding entering into, modifying and breaking contracts.
- Power to hire and pay for services.
- Power to reimburse the agent. A principal can compensate an agent for acting on their behalf.
- Power to sue third parties who fail to exercise POA when needed.
- Power to act as the principal’s personal representative with regard to matters involving the Health Insurance Portability And Accountability Act (HIPAA).
How to Execute the POA Form
An individual can create their own power of attorney form, but it may be a better idea to have an estate planning attorney, a trust lawyer or a notary public draft the document. The individual should file the POA with their local county clerk.
The fee for filing a document varies according to the county. For example, in Morris County, the fee is $30 for the first page and $10 for each additional page. There is an indexing fee of $6 per name in excess of five names.
A New Jersey power of attorney is effective as soon as it is created, acknowledged and notarized. It does not need to be filed with the county clerk to be effective. The POA is discoverable when it is on file with the county clerk’s office. The principal or their attorney should give a copy of the POA to their financial institutions to show that the agent/s have the power to act on their behalf.
Fiduciary Duties of Agent
An agent is a fiduciary of the principal. This means the agent is expected to act in a position of authority and trust with the best interests of the principal in mind. An agent is not allowed to act to their own benefit to the detriment of the principal. An agent who fails to fulfill fiduciary duties for the principal can be sued for financial harm that they caused the principal to suffer.
Mental Capacity for POA
In order for a POA to be valid, the principal must have had sufficient mental capacity to understand the POA when they signed it. They must have known who they named as agents and what powers they gave the agents.
If the principal was not aware of these facts at the time due to disease, age or intoxication, the POA could be held to be invalid. This would be true even if the principal later became aware of the facts and understood the POA.
Undue Influence and POAs
A POA or actions taken after its execution may be held to be invalid or void if the agent or another person standing to benefit from the POA had a hand in its creation or put undue influence on the principal. Undue influence is coercion to get the principal to do something they otherwise would not have done.
For example, say an agent was a child of a principal with a severe disability. If the agent told the principal they would not help them get to doctor’s visits any more if the principal did not name them as an agent, this could be considered undue influence by the agent.
Termination or Revocation of a POA
A POA can be revoked by a document signed by the principal. This document terminates the powers of the agent. A durable power of attorney cannot be revoked by another person other than the principal except upon a court order for good cause.
A POA may be held invalid if the agent dies or is not able to fulfill responsibilities for another reason relating to absence or incapacity, such as being out of the country performing military service.
Naming an Alternate Agent
A principal can reduce the likelihood that the agent will be unavailable by naming in the POA document a successor or alternate agent. A POA can also be held invalid if the court invalidates the document. A court can take this action if it concludes the principal was not mentally competent when they signed the document, the agent engaged in fraud, or the agent exercised undue influence over the principal.
Jessica Zimmer is a journalist and attorney based in northern California. She has practiced in a wide variety of fields, including criminal defense, property law, immigration, employment law, and family law.