What is Power of Attorney
POAs are legal documents that allow you to name an “agent” (also sometimes referred to as an “Attorney-in-fact”) to act on your behalf for financial or health care decisions and are key components of any estate plan. This agent is expected to place the principal’s interests ahead of his or her own, which is why it is important to pick a trustworthy agent.
Different Types of POA
There are many different types of Powers of Attorney (POAs), including a Financial POA, a Healthcare POA, Non-Durable vs. Durable POAs, General vs. Special POAs, and Springing POAs.
A Financial POA agent can act on some or all financial matters on your behalf, which may include things like paying bills, writing checks, opening and closing accounts, filing tax returns, buying and selling property (both financial property such as stocks and bonds as well as physical property), or reallocating a portfolio.
Likewise, a Healthcare POA agent may make health care decisions on your behalf. Common examples might include deciding whether to take certain life sustaining measures or whether to admit you to a hospital/care facility. A major factor to consider in this is the person’s Living Will, or Medical Directive, as it exists for the sole purpose of indicating whether life sustaining measures should be taken if needed and Healthcare POA agents are obligated to honor the wishes specified in the Living Will.
Any POA can be durable or non-durable, but the difference is that “durable” ensures POA powers remain in effect after incapacitation, while “non-durable” POAs halt upon incapacitation. If a POA isn’t expressly specified as durable, the default state is non-durable, so durable POAs are typically encouraged for achieving any long-term goals.
General and Special POAs differ in the range of their powers – General POA agents can make decisions over a broad spectrum of things, while Special POA agents may only be in charge of one specific thing, such as paying one type of bill for you.
A Springing POA agent can only act once you become incapacitated, meaning it is the opposite of a non-durable POA, and is a good choice for anyone who only wants decisions made on their behalf once they are totally unable to do so themselves.
Can You Get a Power of Attorney Without a Lawyer?
While a POA is a legal document, there is no legal requirement to have a lawyer prepare or review it for you. However, many people choose to involve a lawyer in the creation or review of POAs, as they are significant and sometimes complex documents. Since a POA must be knowingly and willingly granted to another individual in the form of a signed legal document, it is wise to seek legal advice before signing anything you do not fully understand.
Why is a Power of Attorney an Important Part of an Estate Plan?
A Durable Power of Attorney (DPOA) can have a significant role in your estate plan. The DPOA agent will be authorized to act on your behalf throughout your life, with the ability to make decisions on a broad range of matters, including finances and real estate. Once signed, it becomes effective immediately and remains in effect even if you become incapacitated, and then terminates upon death. Because of the authority designated to a POA, it is important to choose someone who you believe will act effectively and according to your wishes.
