What is a Power of Attorney
A power of attorney, also known as POA, refers to a legal authorization that allows you (the “principal”) to give a designated person (your “agent”) the power to act on your behalf. The agent will be given full or limited authority to make decisions about the person’s property, finances, investment, or medical care (sometimes, a medical power of attorney is referred to as a “Health Care Proxy”). There are three main powers of attorneys, general power of attorney, limited power of attorney, and durable power of attorney.
Power of attorney’s are often created and assigned during the estate planning process. You may wish to create a power of attorney so you can decide who will manage your assets and make financial decisions on your behalf if you become incapacitated and are no longer of sound mind and able to make your own decisions. POA’s are often used in situations where the individual is unable to be present. This could also be due to military situations, or instances where the person may not be able to be in the same state and would require a POA on their behalf. One thing many people don’t realize about powers of attorney is that all POAs expire upon the principal’s death, and some even expire on the on the principal’s incapacity.
General Power of Attorney
A general POA allows the agent to make decisions of all matters on your behalf as long as you are living and are of sound mind. This type of POA can be used for a variety of situations such as conducting business transactions, managing finances, filing claims, buying or selling property, and paying bills.
Limited Power of Attorney
A limited POA creates more restrictions on the agent. In this case, the principal gives limited authority to the agent for a specific purpose or matter. A common example is to allow someone to oversee a specific real estate transaction, signing of documents for the principal related to that specific transaction and property, but without authority to sign documents related to anything else.
Durable Power of Attorney
Unlike a general power of attorney, a durable power of attorney (sometimes referred to as a DPOA) remains in effect even if the individual becomes incapacitated. Because durable powers of attorney extend beyond a principal’s incapacity, they are very helpful for estate planning purposes, because they allow others to act on your behalf even if you have become incapacitated. Additionally, all medical powers of attorney need to be drafted as durable powers, or else they can’t be used when they are needed most.
Powers of attorney are a key document in your estate plan- if you don’t have one or have one that is out-of-date and more than five years old, contact us to discuss your options.