CEA CEA Powers of Attorney & Advance Directives 1 — Questions and Answers
Question 1: A 'durable' power of attorney differs from a standard power of attorney in that it:
- Expires automatically after five years
- Remains effective if the principal becomes incapacitated (Correct answer)
- Can only be used for real estate transactions
- Requires annual renewal by a notary
Correct answer: Remains effective if the principal becomes incapacitated
A durable power of attorney includes specific language stating that it survives or becomes effective upon the principal's incapacity, unlike a standard POA which terminates at incapacity.
Question 2: A 'springing' power of attorney becomes effective only when:
- The principal reaches a certain age
- A triggering event, such as the principal's incapacity, occurs (Correct answer)
- The agent files it with the county recorder
- The principal's physician approves it
Correct answer: A triggering event, such as the principal's incapacity, occurs
A springing POA 'springs' into effect upon a defined condition, most commonly when a physician certifies the principal's incapacity.
Question 3: Which document allows a person to name someone to make healthcare decisions on their behalf if they are unable to do so?
- Living will
- Healthcare proxy / healthcare power of attorney (Correct answer)
- Durable financial power of attorney
- Revocable living trust
Correct answer: Healthcare proxy / healthcare power of attorney
A healthcare proxy (or healthcare power of attorney) designates an agent to make medical decisions for the principal when the principal lacks capacity.
Question 4: What is the primary purpose of a living will (advance directive)?
- To distribute property without probate
- To document the principal's wishes regarding life-sustaining treatment (Correct answer)
- To authorize an agent to manage financial accounts
- To establish a testamentary trust for minor children
Correct answer: To document the principal's wishes regarding life-sustaining treatment
A living will records the individual's instructions about medical treatments, particularly life-sustaining measures, in the event they cannot communicate their wishes.
Question 5: Which type of power of attorney is typically used for a specific transaction and terminates once that transaction is complete?
- Durable power of attorney
- General power of attorney
- Limited (special) power of attorney (Correct answer)
- Springing power of attorney
Correct answer: Limited (special) power of attorney
A limited or special POA grants authority only for a specific act or transaction, such as closing a real estate sale, and automatically expires when that act is completed.
Question 6: An agent under a financial power of attorney has which primary fiduciary duty?
- To invest the principal's assets for the agent's benefit
- To act in the best interest of the principal (Correct answer)
- To distribute assets to heirs before the principal's death
- To report investment decisions to the state
Correct answer: To act in the best interest of the principal
An agent under a POA is a fiduciary who must act solely in the principal's best interest and cannot benefit personally from their position unless the POA explicitly permits it.
CEA CEA Powers of Attorney & Advance Directives 1
A 'durable' power of attorney differs from a standard power of attorney in that it: