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Situations can arise when you will want someone else to make decisions on your behalf. You may become mentally incapacitated or want someone with expertise about finances to handle specific financial decisions.
Before someone can make legally binding decisions on your behalf, you will need a power of attorney. Each state has different laws for making a valid power of attorney. Creating one is often as simple as filling out a form for your state, signing it, and making sure witnesses or a notary public signs it.
You can find a power of attorney form here. But before you look for the correct form and begin filling it in, you should know more about what a power of attorney is, the different types, and how they work.
A power of attorney is a legal document that allows someone (the principal) to give another person (the agent) the legal power to make decisions on the principal's behalf. An agent is sometimes called an attorney-in-fact or a health care proxy when the power of attorney concerns health care.
An agent must be an adult. Your agent can be paid, like if you choose a professional like an attorney or accountant, or unpaid, which is usually the case with close family members. You can choose two or more co-agents but be careful because it could create disagreements and the need to go to court.
You also can choose alternate agents in case your first choice becomes unavailable. This is wise when you want an agent to act while you are incapacitated.
Under a power of attorney, the agent has a fiduciary duty to act in good faith and make decisions in the principal's best interest. A breach of this fiduciary duty could result in civil lawsuits. In extreme cases of fraud or embezzlement, an agent could face criminal prosecution.
However, going to court after a breach will do little to help a principal if the assets are unrecoverable because the agent has already used them. It is best to choose an agent you trust and who will make wise decisions on your behalf.
Think about why you want a power of attorney. Do you want someone to make financial decisions for you? Or do you need someone to make health care decisions for you or your children? Do you want it to be effective only when you become unable to make decisions for yourself? Is it only needed for a short time while you travel?
After you answer these questions, you will need to choose what type of power of attorney is best for you. The following are common types of powers of attorney. Some can be included in the same document, while others should be in separate documents.
A general power of attorney gives your agent broad powers to control your affairs. In other words, you are giving them the ability to make all the decisions you can make for yourself, with a few exceptions like writing a will.
A special power of attorney gives limited powers to your agent for specific circumstances. For example, you could make a power of attorney that gives someone the power to sell your car or real estate, make certain business decisions, or manage a rental property you own.
A durable power of attorney will remain in effect after you become incapacitated. In some states, it is assumed your power of attorney is durable unless otherwise stated. In other states, a power of attorney is nondurable by default.
Unlike a durable power of attorney, an ordinary power of attorney is valid only when the principal has the mental capacity to make decisions. In some states, if your power of attorney does not have language that it is durable, it will be an ordinary power of attorney and your agent's power will cease if you are in a coma or lack the mental ability to make decisions for yourself.
A springing power of attorney only becomes effective if the principal becomes incapacitated. If you want your agent to have powers over your finances or health care only when you cannot make your own decisions, you could use a springing power of attorney.
Be careful choosing this option. Your power of attorney should state how incapacity is determined to avoid conflicts. Even with a clear description of incapacity, a springing power of attorney can create delays or litigation if there is disagreement among your loved ones.
A power of attorney for a child allows parents and legal guardians to give another adult the power to make decisions about their children's care. You should use this if you plan on leaving your children with someone else for a long period or want to ensure someone will care for your children when you are incapacitated.
If you want someone to make decisions about your health care when you are incapacitated, you can use a power of attorney for health care. This is different from a living will and does not allow your agent to make decisions that contradict your living will.
A living will tells doctors what treatment you want at the end of your life. Your health care agent should be someone who understands your wishes. You can appoint an agent for health care and one for finances, but beware that your agent for financial decisions could keep your health care agent from honoring your wishes by refusing to pay for certain procedures.
If you want someone to make financial decisions for you, you can create a financial power of attorney. You can give your agents broad powers to handle all your finances, or you can limit their powers to specific financial decisions.
In most states, a power of attorney is valid after it is properly signed. However, some states require an agent to sign an acceptance or acknowledgment of the power of attorney before acting on behalf of the principal.
Barring incapacity, a principal can always revoke a power of attorney. If you revoke a power of attorney, you should do so in writing and give copies of the revocation to your agent and any businesses or organizations that the agent has dealt with on your behalf.
An agent's powers will not survive the principal's death. After a principal dies, other estate planning documents like wills and trusts will determine how the principal's estate is managed.
Power of attorney forms are available from many sources. Most state government websites have forms for their residents to use. Hospitals and physician offices often have forms for health care powers of attorney. Or, you can download one of our state-specific forms.
Banks and financial institutions also have preferred forms. Sometimes, banks can be difficult about using other forms, so you may want to learn about your bank's policies before assuming it will accept a form from another source.
Because there are many different powers you can grant an agent, you should speak with a skilled estate planning attorney. An attorney can draft a power of attorney for you or review a form power of attorney that you filled out. An attorney can advise you about specific laws in your state to ensure your power of attorney is valid.
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.
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