If you’re new to the estate planning process, you may have heard the term “power of attorney” (POA) come up. However, you may not know exactly what that means or the authority that it grants.
Knowing what POA is and who to appoint to serve in this critical role should be a key part of any comprehensive estate plan. Here is everything you should know about a power of attorney, and why you should designate someone to be your trusted POA agent (called an “attorney-in-fact”) as part of your estate plan.
What is a power of attorney?
In the simplest terms, power of attorney (POA) is a legal arrangement that allows a trusted person of your choosing to act on your behalf. The person chosen is referred to as the agent or attorney-in-fact, and they have the power to act in the best interest of the principal (the person who appointed them). The agent has broad legal authority to make legal decisions regarding the principal’s property, finances, medical care, or other personal matters, depending on the type of POA.
Power of attorney is typically granted as a plan for someone’s future incapacity, such as if the principal experiences an illness or disability where they are not physically and/or mentally able to sign off on important medical or financial decisions. A POA agreement can end when the principal dies, revokes the POA, or the agent can no longer carry out their duties. Without one, your family may end up incurring thousands of dollars, for years to come, in order to obtain a court appointment to serve as the guardian of your person and the conservator of your assets, not to mention the administrative paperwork these roles demand that creates enormous emotional stress for the person serving in these roles.
Types of POA
Not all POAs are the same, and not all of them have to do specifically with estate planning. There are four primary types that give the agent different types and levels of responsibility:
A general power of attorney gives an agent broad powers to act on your behalf, typically in a financial capacity. This person may handle financial and business transactions, pick up and open your mail, file your tax returns, renew or maintain your insurance whether medical, homeowner’s, or health insurance, settle claims, operate business interests, apply for federal or state benefits, and many other things that an incapacitated principal can’t attend to.
A special power of attorney is when a principal outlines the specific legal powers they wish their agent to exercise. This is less common in estate planning and more common when the principal needs assistance for a single event or a limited time period with things such as a real estate closing, debt collection, and handling a specific business transaction.
Healthcare, Medical POA or Living Will
A healthcare power of attorney is when an agent is granted legal authority to make medical decisions on behalf of their principal. This can be invoked when a principal become suddenly unconscious, mentally incompetent, or is unable to make decisions on their own. A health care POA is not the same as a living will, though some states allow parts of them to be combined. A “living will” refers to a document that authorizes that agent to make end of life decisions for you should your condition become terminal or your brain be injured to the point that you are diagnosed with having a persistent vegetative state coma.
Durability – Making your POA a Durable Document
If you become mentally incompetent due to an illness or accident while a POA is in effect, you can add a durable power of attorney provision to general, special, or healthcare POA to keep the arrangement going. You may also preemptively sign a durable power of attorney with conditions that state the POA cannot go into effect until you are deemed mentally incompetent by a medical professional.
Why do you need a POA in your estate plans?
A person should have a POA in place in the event that they become mentally or physically incapacitated during their lifetime. Like all estate planning tools, a POA is designed to give you peace of mind if the worst-case scenario were to happen. Without a valid POA arrangement, your medical and financial decisions may be left up to a doctor or a family member whom you do not wish to act on your behalf.
How to choose your designated POA
When choosing an agent to act on their behalf, most people name their spouse, an adult child, or a trusted relative, or even a lifelong friend. Some people choose to name more than one person to act in different power attorney roles, as maybe one person is better suited to handling financial matters while another is better with medical or caretaking decisions. They do not need to be the same people nor agree on how to best handle affairs – though it helps if the two people get along and communicate well with each other.
While there are no specific qualifications for someone to act as your agent, you should choose someone whom you trust.
If you’re looking to create a power of attorney or handle other estate planning matters, contact the Law Office of Patricia E. Tichenor to schedule a complimentary consultation.