Situations may come up in life where you want or need someone else to make decisions on your behalf for different reasons. It could be because of an unforeseen illness, to establish a financial relationship with someone you’re close to, or to provide financial security for your children by giving someone else the authority to make financial decisions if something were to happen to you.
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Before someone can make legally binding decisions on your behalf, you will need to create a power of attorney. The laws for making a valid power of attorney can vary by state. Creating one is often as simple as filling out a form and signing it in the presence of witnesses or even a notary public.
You can use this financial power of attorney form to give someone the authority to handle your financial affairs on your behalf and check out other estate planning documents. But before you start working on any power of attorney form, you should know more about this type of document and how it works.
What Is a Power of Attorney?
A power of attorney (“POA”) 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 also sometimes called an attorney-in-fact.
Whoever you choose to act as your agent must be an adult. Sometimes you may also want to reasonably compensate your agent for their services, like if your agent is an attorney or accountant. You can also choose not to compensate your agent, which is usually the case with close family members. People often want to choose two or more co-agents, but this can create disagreements between the co-agents and even lead to legal proceedings. It’s usually better to select alternate agents in case your first choice becomes unavailable. Alternate agents are also sometimes referred to as successor agents or backups.
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. It’s best to choose an agent you trust and who will make wise decisions on your behalf.
Know the Different Types of Powers of Attorney
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.
General Power of Attorney
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 on your behalf? Do you want it to be effective only when you become unable to make decisions for yourself? Maybe you just need one for a short time while you travel?
After you answer these questions, you can choose what type of power of attorney is best for you and your situation. The following are common types of powers of attorney. Some can be included in the same document, while others should be separate.
Financial Power of Attorney
If you want someone to make financial decisions for you, you can create a financial power of attorney. Some examples of what your agent has the authority to do include:
- Manage your real property, bank accounts, and other personal property
- Make real estate transactions
- Oversee your retirement plan
- Handle tax matters (deal with the IRS regarding federal taxes and file tax returns)
However, an agent under this type of power of attorney does not have the authority to make medical decisions on your behalf. You can give an agent broad power to make financial decisions, everyday decisions, and essentially any decision you would be able to make for yourself with a general power of attorney. Alternatively, a limited power of attorney gives your agent authority for a specific amount of time or to complete a specific task and can include special instructions. Once the specified amount of time passes, or the task is complete, your agent’s authority ends.
Health Care Power of Attorney
If you want someone to have the authority to make your health care decisions in the event you are incapacitated and unable to make or communicate your own decisions, you can create a power of attorney for health care, sometimes also called a “medical power of attorney.” This is often combined with a living will to form a two-part health care directive containing:
- Living will with instructions for end-of-life health care
- Health care power of attorney naming a health care agent
A health care directive is also sometimes referred to as an “advance directive.” The person you choose as your health care agent should be someone you trust and who understands your wishes.
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When Does an Agent Have Power To Act?
When your agent is permitted to act on your behalf depends on when you want their authority to become effective. A durable power of attorney is effective once signed unless another date is specified. This power of attorney remains in effect even if the principal is subsequently incapacitated, thereby making it “durable.” This type of power of attorney ends upon the principal’s death or by revocation by the principal.
A springing power of attorney’s effective date is upon the occurrence of a specific event or situation, typically incapacity. This is when you can no longer manage your affairs on your own.
Barring incapacity, you can choose to revoke a power of attorney. A revocation of power of attorney should be done in writing. You should give copies of the revocation to your agent and any businesses or organizations that the agent has dealt with on your behalf.
Finalizing Your Power of Attorney Documents
In most states, a power of attorney is valid after it is properly signed. Generally, this involves signing in the presence of witnesses or getting notarization (acknowledgement of your signature by a certified notary public). Some states may also require an agent to sign an acceptance or acknowledgment of the power of attorney before acting on behalf of the principal. Because the effective date of a power of attorney can be the same day it is signed, it is important to keep your power of attorney documents in a secured location such as a fire-proof safe or in a safe deposit box.
Where You Can Get Power of Attorney Forms
Power of attorney forms are available from many sources. Many state government websites and financial institutions make power of attorney forms available to residents and customers. Also, hospitals often offer health care power of attorney or other health care directive forms to their patients.
Most of the time, you can make your own power of attorney without paying for an attorney’s legal advice. However, many legal forms can be found on the internet making it hard to know whether you’re actually creating a valid legal document. FindLaw’s state-specific estate planning forms were made with a team of attorneys to give you the ability to create legal documents that meet your state law requirements. You are able to create the following:
- Financial Power of Attorney appointing an agent to handle your financial affairs
- Last Will and Testament determining how your assets are distributed to your beneficiaries after your death and naming a guardian for your minor children
- Health Care Directive & Living Will designating a health care agent and leaving instructions regarding your medical wishes
You can check out some FAQs to learn more about FindLaw’s legal forms.