When to Use a Power of Attorney?
A Power of Attorney (POA) is a legal document giving one individual the power to act on behalf of another individual under certain circumstances. A POA ensures that administration of your financial or personal affairs continues, even if you are incapacitated or unavailable. You should recognize when they may require a power of attorney, understand how POA’s work and know-how to go about getting one.
What is a Power of Attorney?
A power of attorney is a legal document whereby one individual (the principal) designates another individual to act on their behalf. The term may also refer to the designated individual.
The principal may indicate to what capacity the agent may act and make decisions on their behalf, whether in a limited or broader scope. If you have a power of attorney and become incapable of acting on your own behalf, your POA may be called to make financial decisions for you. Financial decisions a POA may be authorized to carry out include:
- Banking transactions
- Financial matters
- Healthcare billing
- Real estate tasks and transactions
- Managing government and/or retirement benefits
Reasons to Create a Power of Attorney
Anyone over the age of 18 can create a power of attorney, although younger people rarely think to create one, except in special circumstances. A POA is used for individuals who become incapacitated or in the absence of that individual.
Many circumstances may trigger a power of attorney, including:
- An individual in the military who is deploying overseas
- The development of an illness or other serious health-related issues
- Expatriate workers working overseas who still have their affairs in America
- Young people who are traveling a lot
- Overall peace of mind
How to Set up a Power of Attorney
Anyone can set up a power of attorney, but you will have to look at your state’s guidelines to ensure that you satisfy the requirements, as there are different requirements in each state for setting up a POA. It is recommended that you use an attorney to draft a POA that will accurately reflect the responsibilities you want to give to the agent you choose.
The individual seeking to set up a POA must have the mental capacity to understand the process. Someone who is already incapacitated cannot have a POA drawn up.
The first step in setting up a power of attorney is to choose someone to be your POA. Remember that your POA has the legal authority to handle your affairs when you are incapable of doing it, so you must select someone you trust. You may choose more than one individual to be your agent and ask that they work together, although complications may arise from this scenario. Likewise, you may designate several different individuals to act on your behalf under different circumstances.
You have control over some of the additional details of your power of attorney. For example, the timing of your POA going into effect. You can establish a POA that goes into effect once you are no longer able to handle your affairs yourself or one that goes into effect immediately.
You may also limit the power of attorney. For example, a POA can allow someone to represent you on a deal when you are out of the city or in another jurisdiction.
The POA can be voided at any time by destroying the original document then drawing up a new one. You may also prepare a formal document informing all parties concerned that the POA is invalid. FormPros offers a Revocation of Power of Attorney Form to make this process easy.
Types of Power of Attorney
There are four main types of power of attorney:
- Conventional POA: This is one of the most common types of POAs. The POA agent has power from the moment it is signed until the principal becomes incapacitated. It can be very specific, like a money manager making investment decisions on behalf of their clients – which would be a limited POA. A POA that grants a broader range of power, such as access to all bank accounts, is considered a general POA.
- Durable POA: Durable power of attorney gives the agent the power to decide on the principal’s behalf if the principal becomes incapacitated. Your POA must explicitly indicated that it is durable for your agent to act on your behalf when you’re incapacitated; otherwise, they can only act once you are in a sufficient mental state.
- Medical POA: This type of POA allows the principal to designate a POA agent to make healthcare decisions when you cannot do so yourself. A medical POA comes into effect as soon as it is signed but can only be used if you are declared to be in a mentally incompetent state.
- Springing POA: A springing POA only comes into effect after a certain event or medical condition occurs. It may end at a specified time or upon death.
Things to Remember
- Even if you are married, you may need a power of attorney to enable your spouse to act on your behalf if you are incapacitated. For example, if you have real estate under only your name, your spouse would need a POA to make legal or financial decisions for that property.
- A will is not a POA. A will deals with your property after your death, not decision-making.
- The person you appoint as your POA for personal care (i.e., medical) cannot be someone who is paid to work for you unless they are also a family member.
How to Create a Power of Attorney
It’s never too early to create a power of attorney–you never know when you will need it. A POA can help protect your assets and ensure that you are taken care of even when you are incapacitated or physically unavailable. As long as you designate someone you trust as an agent, rest assured that your affairs will remain in order, no matter what happens.
Thinking that now is the time to create a power of attorney? Form Pros can easily help you create a durable power of attorney, a durable power of attorney for healthcare, or even a living will to help ensure that your future is set, no matter what.