Many misconceptions surround the legal term "power of attorney." People often think that their lawyer acts in the capacity of power of attorney. However, a person assigned as power of attorney does not have to be a licensed attorney and in most cases is not.
So, what is a power of attorney, and at what point do you need one?
A power of attorney is a document that allows you to appoint a person or organization to handle your affairs when you are unable to do so. The person you assign is referred to as your agent.
Why a Power of Attorney Is Necessary
While you may think a will is all you need in terms of estate planning, a will covers only your affairs when you pass away. A power of attorney can make financial decisions on your behalf if you become mentally or physically incapable. The thought of power of attorney may be off-putting because you are planning for the worst; however, the assigning of the authority of power of attorney is often quite beneficial because you never know where life may lead.
A power of attorney can be assigned at any time. Contrary to popular belief, you should assign a power of attorney when you are healthy and able. Most people will meet with a lawyer to assign power of attorney when they have property and assets they want to protect. Indeed, you should not wait until you are on your deathbed to assign power of attorney. You will want to get it done early and review the document (or documents) regularly to make sure they reflect your wishes and current conditions.
If you become incapable and do not have a power of attorney, a public guardian and trustee will become the guardian of your property. If someone who cares about you wants to be named guardian, they will have to go to the court and ask to be named guardian. It is much more efficient and far less expensive to assign your own guardian before the need arises.
Types of Power of Attorney
Power of attorney takes many forms, and you need to know which one fits your needs. A "general" power of attorney authorizes your agent to act on your behalf in a variety of different situations. The general power of attorney is broad and provides extensive power to the agent. A "special" power of attorney authorizes your agent to act on your behalf in specific situations only. The powers of a special power of attorney may be limited, for instance, to those in connection with a specific litigation, such as a personal injury case. A health care power of attorney allows your agent to make health care decisions for you if you become incapacitated. A "durable" power of attorney takes effect once you sign and lasts no matter what your situation until death. A "springing" power of attorney takes effect not when you sign but when you are not competent to make your own decisions, and it must be proven that you are not competent. After you sign, you can still change the power of attorney to accommodate your current situation, and you can revoke the power of attorney as long as you are competent.
Choosing a Power of Attorney
Who should be your power of attorney? The person you assign should be someone you trust. This will be someone who will manage your finances and property and make health care decisions in the event that you are unable to do so. It should be a close relative, spouse, child or a trusted lifelong friend. It should also be someone who can handle these duties and who is willing to take them on. But, keep in mind, as previously mentioned, the power of attorney can be revoked at any time in the event of a falling out.
If you have significant financial assets, it may be best to assign special power of attorney to someone who's versed in managing investments, such as an accountant or a financial advisor. As long as your power of attorney acts in your best interests, there's no liability for financial losses, but someone experienced in investing and managing money may be a wiser steward of your assets.
When choosing a health care power of attorney, you should sit down with the individual ahead of time and make him or her aware of the treatments you do and do not want. Make sure this person is comfortable handling these decisions; some people have religious or moral objections to accepting or refusing life-saving treatments. Remember that your power of attorney will be in charge if you become incapacitated, and this person may choose not to follow the instructions you spelled out. Similarly, someone whose decisions can be swayed by strong emotion, such as a spouse or child, may not be the best choice for this role.Also consider assigning a successor agent. There is always the possibility that the person you assign as your power of attorney may not be able to or will refuse to act as your agent. A successor agent will take over as your agent only if necessary.
You might not need to hire a lawyer. Power of attorney forms can be found online or at office supply stores, but these forms may be too general. You still need to make sure that the form states who the power of attorney is and what their specific role is, be it health care, durable or property. You are also responsible for checking that the power of attorney corresponds with the laws of your state. Furthermore, the document must be notarized to be legal. A notary public can be found at banks, law offices, libraries and hospitals. A notary public will charge a nominal fee for the service.
If you are uncomfortable handling these tasks yourself, then consult a lawyer. An attorney will not charge a large fee for assistance, and the lawyer will keep a copy of the document on file if you wish. You can also be more confident that your power of attorney follows the laws of your state.
Most people who deal with financial matters run into a durable power of attorney at some point or another. However, power of attorney documents are not one-size-fits-all; a durable power of attorney is a must-have instrument for anyone truly concerned about long-term medical or financial implications.
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