Your agent under a power of attorney helps you make financial decisions when you can’t. But what should you consider when naming an agent?
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What Is a Power of Attorney?
A power of attorney (POA) is a legal document often used in estate planning. The drafter gives another person the power to act as their decision-maker in certain situations. The drafter of the power of attorney is generally known as the principal or grantor. The individual to whom the drafter gives authority to act as their decision-maker is called the agent or attorney-in-fact.
There are many different types of power of attorney documents. Ultimately, the power of attorney that is correct for you depends on what decision-making power you would like to grant to your agent.
Unlike a guardian or conservator, the principal voluntarily names an agent in a power of attorney and is not appointed by a court.
Creating a power of attorney can give you peace of mind to know that you have decision-makers in place to act on your behalf in situations where you may not be able to act.
Why Does It Matter Which Power of Attorney I Am Creating?
Different types of POAs can give various powers to your agents. These types of powers of attorney include:
General power of attorney: This power of attorney allows your agent to make any legal decision on your behalf. However, this power of attorney is non-durable, and the power will end when you become incapacitated. As a result, if you can no longer make decisions and have only drafted a general power of attorney, your named agent can’t act on your behalf.
Durable power of attorney: A durable power of attorney stays in effect when you become incapacitated. A durable power of attorney is typically used in a medical power of attorney to allow your agent to make healthcare decisions for you when you cannot make them yourself.
Financial power of attorney: A financial power of attorney gives your agent the power to make financial decisions on your behalf. You direct what powers they have, such as withdrawing money from your bank account, interacting with your financial institutions, making real estate transactions, or managing your properties.
Health carepower of attorney: Sometimes referred to as a medical power of attorney, this power of attorney allows your agent to make medical decisions on your behalf. A durable health carepower of attorney allows your agent to act during your incapacity. A health care power of attorney is often drafted with a living will, giving your agent your wishes for end-of-life medical care. Collectively, these documents may be referred to as advanced healthcare directives.
Springing power of attorney: A springing power of attorney only comes into effect after a specific instance, such as if you become incapacitated. While most powers of attorney take effect upon signing, a springing poa does not.
Limited power of attorney: The limited power of attorney gives your agent the authority to perform only the specific tasks named in the POA. This can also be referred to as a special or specific power of attorney. If you want to name an agent to perform one specific task and limit your agent’s authority to act, this is the right option for you. For example, if you are out of town, you may name someone to complete a real estate transaction on your behalf.
Who Can Be an Agent?
Typically, any adult over the age of eighteen (18) can serve as an agent in a power of attorney. However, in some states, there are additional requirements that your agent must meet. Before deciding who you want to be your agent, make sure you consult your state laws for any prohibitions.
Additionally, you can name an attorney, accountant, bank, or financial institution to serve as your power of attorney agent.
Can I Name a Co-Agent?
You do not need to name only one person as your agent. You may designate two or more individuals to act as your co-agents. However, co-agents can complicate things. You must decide if they work independently or jointly. For example, if your agents can act independently and one agent wants to invest your money in CDs but your other agent wants to keep the money liquid, whose instruction should a bank follow? If your agents must act jointly, they may stall any action on your behalf if they can’t agree. For example, suppose one agent wants to sell your investment property in a hot real estate market, but the other agent wants to keep the property for sentimental reasons. In that case, the first agent can’t sell the property.
It is a good idea to choose backup agents to serve as your agent if your first choice is unable or unwilling to serve. In your document, you name your primary agent and any backup agents as successor agents to act on your behalf.
What Should I Consider When Choosing an Agent?
Because your agent can act on your behalf, spend your money and obligate you to contracts, the person you name must be someone you trust. Often, your agent can be a family member such as your spouse, parent, or child. Or you can choose a friend.
For example, if you create a financial power of attorney to solely handle your financial matters and a close friend has experience managing financial assets, they may make more sense to name as your agent than a loved one. If you have a family member or friend in the medical field, they may be appropriate to act as your agent under your medical power of attorney.
And depending on the type of power of attorney, your agent must be able to deal with banks, medical providers, etc.
Can I Change My Agent in My Power of Attorney?
Yes. You can always change your named agent unless you are incapacitated. If you have previously drafted a power of attorney and would like to make a change, you may revoke a durable power of attorney and notify a prior agent that their services won’t be required.
Ready To Create Your Power of Attorney?
If you are drafting a basic power of attorney, you can use our state-specific power of attorney forms to process on your own. However, if you have a unique situation, you should discuss your options and get legal advice from an estate planning attorney.
