A Power of Attorney (POA) is an essential element of every solid estate plan. It’s a legal document that allows you to grant another person the authority to make important decisions on your behalf. Such decisions may include financial, business, or legal matters. A person who issues a POA is called the principal while the person is empowered to act on behalf of the principal is called an agent or attorney-in-fact. Despite the name, the person you choose as your agent in a power of attorney doesn’t have to be a legal professional or a lawyer.
In this article, we will provide examples of different kinds of POA documents. We will also explain how they work and in which situations they may be especially useful.
General, Limited or Special?
The three most basic kinds of powers of attorney are general, limited, and special. General POAs allow the agent to make choices and take decisions with regard to a variety of matters pertaining to different areas of the principal’s life. For example, if you create a general power of attorney where one of your adult children is appointed as your agent, he or she will be able to pay bills on your behalf, manage your real estate, sign checks, and even file your tax returns. All of these powers can be granted by one general POA.
In contrast, by the virtue of a limited power of attorney, you can restrict or limit the scope of decisions that the agent will be able to make to a specific domain of your life – for example, just manage your investment accounts. A special power of attorney limits the capacity of an agent even more and as it can give him or her the authority to act on your behalf only in one specific setting, event, or procedure, such as the sale of a home.
Durable Power of Attorney (DPOA)
A normal or regular power of attorney document loses its validity once the principal becomes legally incapacitated. That’s why a regular power of attorney has very limited use in the context of estate planning. In order to make sure that a person you trust will be able to make decisions on your behalf in the event you become incapacitated, you need a durable power of attorney. This document and all its provisions will remain in effect until you change it, revoke it, or until your death. Becoming mentally or otherwise unable to make decisions on your behalf, on the other hand, will have no effect on the validity of a durable power of attorney.
A Durable Power of Attorney grants your agent the authority to manage your financial affairs and secure your business interests if you become incapacitated. If you so choose, it can also be used as a matter of convenience for you to allow someone else to help manage your financial affairs on your behalf, even if you are not incapacitated. The agent is always under a fiduciary duty to manage your financial affairs solely for your benefit.
Medical Power of Attorney
A Durable Power of Attorney gives someone the authority to make financial decisions and take actions on your behalf, but does not give that person the ability to make medical decisions. A Medical Power of Attorney gives the person you designate the authority to make decisions about your medical care, only in the event you are unable to do so. We also prepare Medical Powers of Attorney to provide important releases so that your agent can be privy to all of your medical information. In this way, you can designate in advance who you want making the most important decisions for you if you become incapacitated.
But Why is it Necessary?
If you become incapacitated and do not have a DPOA or Medical Power of Attorney, someone will have to be appointed by the court in a costly process over which you will have no control whatsoever. By creating a durable power of attorney for finances and a power of attorney for medical decisions, you can ensure that a person you trust most will manage your personal and financial affairs, especially when you are no longer able to.
Let’s Discuss Your Estate Planning Needs
If you have some estate planning questions, we encourage you to contact the law offices of Fraser, Wilson & Bryan, P.C. Our attorneys will gladly analyze your situation and help you create an estate plan most suited to your unique circumstances.
