Power of Attorney
A power of attorney (POA) is an estate planning tool where you appoint a person, known as the agent, to manage your affairs. Typically, the POA is appointed to manage financial or medical matters when you cannot do so yourself because you are incapacitated by illness or injury.
What Constitutes a Power of Attorney?
A power of attorney is the legal authorization for one person, the agent, to act on behalf of another person, the principal. Often called a letter of attorney or just a "POA", they are a common element of estate planning as they let a person who is losing their ability to manage their own affairs choose someone they trust to make decisions for them.
There are six types of POA, described below.
- Durable POA
A durable POA takes effect immediately upon your signature unless the POA states otherwise and allows your agent to continue acting on your behalf even when you are incapacitated. A durable POA terminates only when you die or when a revocation of POA form is issued.
- Non-durable POA
A non-durable POA takes effect immediately upon your signature unless the POA states otherwise. It does not allow your agent to continue acting on your behalf when you become incapacitated. In the latter scenario, only a court-appointed guardian or conservator can make decisions on your behalf.
3. Medical POA
A medical POA is sometimes referred to as an advance directive because it allows you to appoint a health care agent to make medical decisions for you when you cannot do so. It is limited by your specific medical preferences and any other directive you may have as part of your estate plan, like a living will or a Do Not Resuscitate (DNR) form.
- General POA
A general POA allocates broad powers to the agent to act on financial, business, real estate, and legal matters. This POA is limited only by the terms set out in the POA or by any relevant state statute.
- Limited (Special) POA
A limited (Special) POA allows the agent to act for a specific purpose and once that purpose is accomplished, the POA expires.
- Springing POA
A springing POA takes effect if/when a certain event or medical condition occurs as specified in the POA. It ends at a specified time as outlined in the POA or if/when you become incapacitated or die.
When is a Power of Attorney Necessary?
A power of attorney is a useful tool for people who are planning their estate but who are losing the ability to understand the repercussions of their decisions and actions. By giving an agent the power to make those decisions, a principal can rest assured that someone is taking care of them.
A POA is common in the following situations:
- The principal is suffering from a worsening medical condition that impacts their mental capacity, like Alzheimer's or dementia
- The principal is physically disabled and cannot sign important documents
- The principal wants to give someone else the power to make specific decisions on their behalf
There are, of course, other reasons why you may need or want a power of attorney created. Speaking to an estate planning attorney in State is the best way for you to identify and determine what will work best for you.
How is a Letter of Attorney Created?
Each state has its own requirements for creating a letter of attorney, though most are based on the parties and witnesses signing a power of attorney form. Because having the power to make financial and medical decisions for someone else is such a serious matter, each state incorporates formalities that must be followed to:
- Ensure the power of attorney is legitimate; and
- Confirm the person relinquishing their rights is doing it knowingly and voluntarily.
Many states require a witness along with notarization. Contact us to find out exactly what the process is so that you don't make mistakes that could prompt delays or problems.