What is a Power of Attorney?
A power of attorney (POA) is a document that allows you to appoint a person or organization to manage your affairs if you become unable to do so or if you would just prefer someone else do so. It is an important part of your estate plan. However, all POAs are not created equal. Each type gives your attorney-in-fact (the person who will be making decisions on your behalf) a different level of control. Below are some of the types.
General Power of Attorney
A general POA gives broad powers to a person or organization (known as an agent or attorney-in-fact) to act in your behalf. These powers include handling financial and business transactions, buying life insurance, settling claims, operating business interests, making gifts, and employing professional help. A general power of attorney is an effective tool if you will be out of the country and need someone to handle certain matters, or when you are physically or mentally incapable of managing your affairs. A general POA is often included in an estate plan to make sure someone can handle financial matters.
Special Power of Attorney
You can specify exactly what powers an agent may exercise by signing a special power of attorney. This is often used when one cannot handle certain affairs due to other commitments or health reasons. Selling property (personal and real), managing real estate, collecting debts, and handling business transactions are some of the common matters specified in a special POA document.
Health Care Power of Attorney
A health care power of attorney grants your agent authority to make medical decisions for you if you are unconscious, mentally incompetent, or otherwise unable to make decisions on your own. While not the same thing as a living will, many states allow you to include your preference about being kept on life support. Some states will allow you to combine parts of the health care POA and living will into an advanced health care directive.
Durable Power of Attorney
Suppose you become mentally incompetent due to illness or accident while you have a power of attorney in effect. Will the document remain valid? To safeguard against any problems, you can sign a durable power of attorney. This is simply a general, special, or health care POA that has a durability provision to keep the current power of attorney in effect.
You might also sign a durable power of attorney to prepare for the possibility that you may become mentally incompetent due to illness or injury. You may also specify in the power of attorney that it cannot go into effect until a doctor certifies you as mentally incompetent though this may delay it’s effectiveness. You may name a specific doctor who you wish to determine your competency or require that two licensed physicians agree on your mental state.
How to Choose an Agent for your Power of Attorney
Trust is a key factor when choosing an agent. Whether the agent selected is a friend, relative, organization, or attorney, you need someone who will look out for your best interests, respect your wishes, and won’t abuse the powers granted to him or her.
It is important for an agent to keep accurate records of all transactions done on your behalf and to provide you with periodic updates to keep you informed. If you are unable to review updates yourself, direct your agent to give an account to a third party.
As for legal liability, an agent is held responsible only for intentional misconduct, not for unknowingly doing something wrong. This protection is included in the power of attorney documents to encourage people to accept agent responsibilities.
Should you, a friend, or relative suspect wrongdoing on the part of your agent, report the suspected abuse to a law enforcement agency and consult a lawyer.
How Many Agents Should You Appoint for Your Power of Attorney
While you can appoint multiple agents, decide whether these agents must act jointly or separately in making decisions. Multiple agents can ensure more sound decisions, acting as checks and balances against one another. The downside is that multiple agents can disagree and one person’s schedule can potentially delay important transactions or signings of legal documents.
If you appoint only one agent, have a backup. Agents can fall ill, be injured, or somehow be unable to serve when the time comes. A successor agent takes over power of attorney duties from the original agent if needed.
Please contact us if you believe you may need to create or update a power of attorney or develop an up to date estate plan.