Life is unpredictable, and we might find ourselves in a position where we are unable to manage our own affairs. Whether that be due to injury, illness, or simply being unavailable, the need to appoint a trusted individual to act on our behalf may become a reality someday. This is where a Power of Attorney (POA) comes into play. There are a number of different types of POAs with different responsibilities as outlined below.
What is a Power of Attorney (POA)?
A Power of Attorney (POA) is a legal document that grants a trusted individual (an agent) to make decisions on behalf of the principal (you), when the principal is temporarily or permanently unavailable, incapacitated or indisposed.
A POA can be as limited or as broad as the principal requests. The person granted power of attorney can act on behalf of the principal in financial, legal, or health care decisions – but only to the extent specified on the document.
Types of Power of Attorney
There are different types of POAs, which are each designed for different purposes:
General Power POA
This agreement allows the agent to act on behalf of the principal in a wide range of legal, financial and business matters such as managing bank accounts, signing contracts, selling property, filing taxes and managing assets for the principal.
This authority is generally used for a specified period, such as when the principal is deemed physically or mentally unable to act.
Durable Power of Attorney (DPOA)
If the principal wants the POA to remain in effect even if they become disabled, a Durable Power of Attorney (DPOA) should be signed. This ensures that you have a trusted source looking after your finances, legal projects or property matters, even if the attendant becomes mentally incapacitated.
This authority can apply to both financial and healthcare matters, and is particularly useful for long-term planning and elderly care.
Limited POA
A limited POA gives an agent the ability to act on behalf of the principal, but only under certain circumstances or for a specified period of time. For example, the agent could have the POA when the principal is out of the country and is selling property owned by the principal who cannot be present to sign documents related to the sale.
This type of POA is narrowly focused and limits the agent’s authority to this specific task.
Springing Power POA
A Springing Power POA defines the kind of event or level of incapacitation that needs to “spring” into effect before a Durable POA is able to act. Typically this is used for health or financial matters in case the principal is unable to make decisions themself.
For example, this type of POA might be acted into effect when a doctor certifies that the principal is unable to manage their own affairs.
Healthcare Power of Attorney (Health Proxy)
A Healthcare POA (Health Proxy) is a type of Durable POA that allows an agent to make health care decisions on behalf of the principal if they become unable to do so themselves. This could include decisions about medical treatments, surgeries, or end-of-life care.
This type of POA is essential to appoint to a trusted source, as making decisions during a principal’s medical crises or incapacitation can be highly personal.
Why should you have a POA?
A POA can provide you with both convenience and protection by giving a trusted individual the legal authority to act on your behalf and in your interests.
Plans for Health Emergencies - You never know when you might become physically or mentally unable to manage your affairs, either due to aging, illness or an accident. Without a POA, your family might get involved in a lengthy court process to be appointed as your agent.
Provides Financial Security in Emergencies – If you become incapacitated, an agent can move your financial responsibilities forward, such as signing checks, paying bills, filing taxes, and managing your accounts. An agent will effectively protect your assets in your best interest, and can provide more informed decisions rather than appointing someone from your family.
Prevents Family Conflict – In the instance that your family is in the position to handle your financial or medical decisions, members might disagree with each other on these very personal decisions. A POA establishes clear instructions about your preferences, and equips your family with a trusted source who can make those difficult decisions with the principal’s best interest.
Convenience – A POA is convenient if the principal is temporarily unavailable to handle in-person legal matters. For example, if you are going overseas for an extended period of time, someone is appointed to act on your behalf to handle finances or sign legal documents.
Estate Planning Tool – POAs are simple and inexpensive documents to make. If you don’t know where to start, your attorney can walk you through options that will best protect your assets, well-being and family relationships in the future.
How to set up a POA?
Establishing a POA is a relatively straightforward process, but it must be done carefully and intentionally to ensure legal validity. Establishing a POA essentially requires selecting an agent, drafting the document according to your state’s laws, and understanding the risks associated with your appointment. Below are some basic steps:
Choose your agent – Carefully choose a trusted person who will be responsible for acting on your behalf in legal, healthcare or otherwise specified matters.
Decide on scope of power – Determine whether your POA will be broad or limited in scope, and whether it will be in effect immediately or under a certain circumstance.
Consult an attorney – While there are templates available online, it’s recommended to consult a legal professional, especially if you have complex financial or healthcare needs.
Sign and notarize the document – Check to see if your state requires a POA to be signed in front of a notary public, and if witnesses are required.
Distribute copies – Make sure your agent, doctor (if it’s a Healthcare POA) and any financial institutions or third parties receive copies of the POA for them to reference as needed.
The Importance of a POA
In general, setting up a Power of Attorney is making use of an important tool to ensure your affairs are managed according to your wishes when you are unable to do so on your own. POA’s offer flexibility and peace of mind, and can be tailored to your specific needs to protect your interest.
If you haven’t already, it may be worth looking into setting up a POA as part of your estate planning process to ensure a secure future for you and your loved ones. The Everson Law Firm provides full-service POA representation and can offer expert assistance in creating a POA document for you or your loved ones. Contact us to set up a free consultation with Attorney Gabriel Siehr.
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