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A Power of Attorney (also referred to as a POA) is a legal document that gives someone authority to act or make decisions on your behalf.
There are different types of powers of attorney. These are powerful legal documents that can help you with various legal matters. Getting these important estate planning documents in place can bring you and your loved ones peace of mind.
A financial power of attorney lets you choose someone to make financial decisions for you. You can also limit their power and how they make choices for you. A financial power of attorney is not only relevant in the elder law context. It is an important document that should be in everyone's estate plan, regardless of age.
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The person who signs a power of attorney is called a "principal" or a "grantor." The person granted decision-making authority is called an "attorney-in-fact" or an "agent." The attorney-in-fact or agent can make decisions on behalf of the principal. The specific powers granted by the principal in the power of attorney document determine what actions the agent can take.
The type of power of attorney document you draft determines the following:
This page focuses on using a POA for financial decisions.
Anyone could become incapacitated at some point in their lifetime. A financial power of attorney is a valuable document to have in every estate plan.
This legal document most often handles financial matters for:
A person can only sign a power of attorney if they are of sound mind. If you become mentally incompetent or experience incapacitation before you sign the legal document, it is possible:
If you have yet to appoint an agent to manage your financial affairs, you may be left vulnerable in your financial matters. Bills may go unpaid. You could lose your home.
Family members or friends often help if you cannot handle your financial affairs. When someone fails to put a financial power of attorney in place, loved ones may be forced to seek guardianship of an incapacitated or mentally incompetent person.
Guardianship is a legal process that requires going to court and proving incapacity. This legal process is best accomplished after obtaining legal advice. It can be time-consuming. In addition to taking time and money, the guardianship process can get messy in cases where individuals, such as family members, contest the guardianship.
Had a power of attorney been in place, the POA would be effective immediately once a person is deemed incompetent. Having this document in place ensures:
A durable, general financial power of attorney allows your agent to handle a wide range of financial matters. In this context, "durable" means it stays in place after you are incapacitated.
The person you choose as your Financial Power of Attorney can handle matters such as:
You can also temporarily give someone these powers. You may want to give someone limited financial power of attorney if:
Executing financial power of attorney documents is one of the cornerstones of elder law. One might give financial power of attorney to an adult child. This can help when an older adult parent has trouble understanding their finances and paying their bills on time.
A financial power of attorney is a powerful legal document that can give your agent broad-reaching control over your financial affairs. You or a loved one should only enter into a power of attorney arrangement with people if you get legal advice and understand the full implications of this legal document.
It should come as no surprise that fraud schemes targeting adults over 65 have exploded. Adults who have been the victim of fraud may feel more secure with a trusted family member watching out for their finances.
But if you select the wrong person as your attorney-in-fact, it can have far-reaching negative consequences if you are not careful. If your attorney-in-fact were to misuse their power, there is little you can do to recover your assets in most situations.
With all the powers that can come with a POA, there are a few limitations on the role of power of attorney. The person named as the attorney-in-fact cannot:
Absent a few exceptions, the authority granted by a power of attorney document ends upon the grantor's death. The last will and testament takes effect at the person's death.
After death, the executor or personal representative takes charge of decision-making for the estate. If the person dies without a will, the agent who holds the power of attorney can petition the probate court to be named as administrator of the estate.
We could also ask this question: “What is the difference between a 'durable' and a 'limited' power of attorney?"
A durable power of attorney gives the agent authority to make decisions immediately after the grantor signs the document. That authority continues until the grantor's death. The authority could also end upon revocation. The grantor could revoke the durable power of attorney and end the agent's authority at any time.
A limited power of attorney:
The terms of the legal document define those conditions.
For example, a grantor living in New York might give someone authority to purchase real estate for them in California. That authority may end when the purchase is complete. Or a power of attorney may go into effect when the grantor becomes incapacitated, as determined by a medical professional, and continue for as long as they are incapacitated.
It's essential to define the conditions of a limited power of attorney as clearly as possible to prevent misunderstandings and potential legal challenges.
A legally valid power of attorney requires only a few specific things:
You cannot assign power of attorney to a child under 18 or a convicted felon.
Once the documents meet the minimal conditions, the remainder of the document should:
You can create a financial power of attorney from home with a DIY form in simple situations. Be sure to pick one for your specific state and follow the directions.
If your situation is complex, you may want legal advice to help create a POA from an estate planning attorney. Obtaining legal advice, even just for informational purposes, is always a good idea. The peace of mind you get from discussing matters impacting your financial affairs is priceless.
Experienced state planning lawyers help people make decisions about their legal affairs. Experienced estate planning attorneys have likely witnessed the unintended consequences of poorly drafted legal documents. An estate planning attorney can ensure your legal documents comply with all legal requirements.
You can browse lists of attorneys focusing on estate planning and find the right one.
It can be helpful to know the characteristics of different types of powers of attorney to understand which may be right for you. There are several types of power of attorney.
Two types of POAs relate to when decision-making authority begins. Two relate to the scope of authority given. And two relate to specific kinds of decisions that the agent can make.
Once signed, a durable POA remains in effect until the grantor revokes the legal document or the grantor dies.
If you cannot decide for yourself, the person you have granted that authority can immediately begin making decisions.
A springing POA takes effect (or springs into action) when certain conditions happen. A clause in the POA defines those conditions.
Unlike a durable power of attorney, this type of POA doesn't become effective until you have been declared incapacitated or incompetent. There may be a delay before it takes effect. Your POA will typically define how an incapacity declaration is determined.
This kind of POA allows the attorney-in-fact to act on any matters state law allows.
They can act as your agent to sell your property, manage your bank accounts, or manage your legal affairs. (See below to learn what they can't do with a power of attorney.)
This POA gives your agent authority to perform specific tasks for a particular time.
A financial POA allows your agent to make financial decisions on your behalf.
An advance health care directive is a legal document that guides your future medical care. Your state law determines particular advance health care documents available for you and what they cover.
A healthcare power of attorney, also called a medical power of attorney, allows your agent to make healthcare and end-of-life decisions. This attorney-in-fact is also called a healthcare proxy. A medical power of attorney gives your agent the authority to actively make medical decisions informed by your preferences and guided by your medical providers. Unless you limit the powers, your healthcare agent can make any medical decision for you that you could make for yourself.
A healthcare power of attorney is not the same as a living will. A living will explains your preferences for medical treatment, including medical care you do not want to receive. This can include instructions on:
Legal advice can help you determine which types of power of attorney documents you want in your plan.
You can draft your own power of attorney form or help a family member create their own power of attorney. Visit FindLaw's Estate Planning Legal Forms and Services for a customized form you can complete in minutes.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
Contact a qualified attorney for legal services focused on estate planning issues.