A Quick Guide to Power of Attorneys
If you’ve ever wondered, “what is a Power of Attorney,” or if you are in that stage of life where you are estate planning, then this article is for you. Knowing what a POA is, how to use it, and knowing the different types of POA’s is very important to a post retirement life.
A Power of Attorney is a legal document that gives another person the power to act on your behalf. The person that is responsible to act in your best interest is referred to as the “agent” or “attorney-in-fact,” and the person that they are acting on behalf of (you) is the “principal.” Things that could possibly fall under the responsibility of the agent are financial, medical, and property related affairs.
What Can an Agent Do?
What an agent can and cannot do all depends on which kind of POA they were appointed to. This determines the extent of their power and the circumstances of their power. But an overall look into what an agent is capable of doing is as below.
- Make medical decisions
- Make financial decisions
- Open and close bank accounts
- Have access to your financial accounts
- Conducting financial transactions
- Buy/sell property
- Decide on guardianship
Why Would Someone Need a POA?
Power of Attorneys are typically appointed because someone might not be able to handle their own affairs. This could be due to illness, disability, or absence. A Power of Attorney could step in in any of these situations and handle financial or medical decisions for a person.
Power of Attorneys are useful in many situations. You might want to appoint a POA to specifically make medical decisions in case you become incapacitated and are unable to take care of yourself. A POA could also be used if you are unavailable for a period of time and you want to give someone you trust the power to make financial decisions, buy/sell property, or make business decisions for you while you’re gone. Or you could appoint this person the same financial power just in the rare case you become incapacitated.
As you can see, there are several reasons and situations that you might want to appoint a Power of Attorney. That is why there are several different types of POAs, each for their own specific situation. Helping everyone to consider this as a viable option in case of an unfortunate event or as a strategic financial maneuver.
Types of Power of Attorney
General Power of Attorney
A General Power of Attorney grants the agent authority to conduct a wide arrange of responsibilities on the principal’s behalf. From opening/closing bank accounts to conducting financial transactions to filing taxes to transferring trusts all on the principal’s behalf. A general POA is cancelled once the the POA is revoked or once the principal becomes incapacitated.
Durable Power of Attorney
A Durable Power of Attorney is granted the same powers that a General, Special, Healthcare, or Springing POA, but is maintained after the principal is medically or mentally incapacitated.
Special Power of Attorney
A Special Power of Attorney grants power to an agent to a very limited range of authority and typically for a limited period of time. Tasks that the agent is able to carry out on behalf of the principal can range from certain financial transactions to buying/selling certain property.
Health Care Power of Attorney
A Health Care Power of Attorney is specifically to grant an agent power to make healthcare related decisions. This is for cases where the principal is undergoing surgery, under anesthetia, or incapacitated.
A Springing Power of Attorney becomes effective and grants power to an agent if a certain event happens. This could be such as if the principal becomes incapacitated.
What are the Risks?
An agent is supposed to act in the principal’s best interest, but there is a risk in choosing the wrong person to act on your behalf. Under certain circumstances an agent could transfer, sell, or buy property/assets without your permission. This is because under Power of Attorney he has access to financial accounts and has the power to make transfers without direct permission. In many ways, granting POA to someone, is permission to give someone control over your financial assets and medical outcomes.
There have been cases where an agent has abused their power and not acted in the principal’s best interest but in benefit of their own. That is why choosing someone you trust to be your agent is tremendously important. Being an agent and assigning a POA is not an easy task and lots of thought should be put into it by yourself and loved ones. There are risks involved and it’s important you know that. Yet it is a very important tool that can protect you and benefit you in many situations.
We recommend contacting a legal professional to set up a POA if you are considering one. It is a vital part of Estate Planning and is often included in many Will/Trust plans, but you don’t necessarily need a Will or Trust set up if you want a Power of Attorney. Feel free to contact us if you are considering setting up a Power of Attorney, we would be happy to help you out.
