There are many reasons you may need to set up power of attorney documents. Choosing who you should select, what type of power of attorney document you need, and what limits to give are some of the things you need to consider. Let’s go through what a power of attorney is, the different types and their limits, and what the benefits of having a power of attorney in place.
What is a Power of Attorney
A Power of Attorney (POA) is a document in which the principal (you) gives another person (called the agent or attorney-in-fact) the power to make decisions for you if you become incapacitated. The agent does not have to be an actual attorney, but rather can be a trusted family member or friend. However, because of the amount of power they can hold over your decisions, it is important to choose someone you fully trust to have your best interest at heart.
Limits of a POA
A power of attorney gives an agent the ability to make a variety of decisions for the principal, but these powers are limited to the type of power of attorney they are granted.
Different Types of POAs
Depending on the specific Power of Attorney type that is used, the agent can have limited or extensive control over the principal’s financial decisions, medical decisions, and property. This can include controlling an individual’s retirement account, handling their financial decisions, or making life-altering medical changes.
A general power of attorney gives the agent control over all of the principal’s financial, medical, and property matters. This type of power can typically be given when someone is unable to take care of themselves any longer, such as a coma, mental health reasons, or any other incapacitation.
Limited powers of attorney give the agent control over specific aspects of the principal’s life. For example, this can be only given the agent access to handling their retirement accounts. Or giving the agent a limited amount of time in which they can act on the principal’s behalf. For example, if the principal will be out of the country for a few years, they can give a family member control over their property for that time frame.
Durable Power of Attorney
The durable power of attorney allows the agent to make decisions in one aspect of the principal’s life but not in another aspect. For example, they can be given control over the financial or property decisions on behalf of the principal, but not the medical decisions. There are typically two types of durable power of attorney—the healthcare power of attorney and financial power of attorney.
Healthcare Power of Attorney: The healthcare power of attorney, gives the agent control over their healthcare decisions but not their financial decisions. For example, they are able to decide if the agent should be given certain medications or taken off of life support, but they cannot pay for medical bills with the principal’s money.
Financial Power of Attorney: A financial power of attorney gives the agent control over the principal’s financial decisions. This can include signing checks, filing tax returns, and handling retirement/investment accounts. However, the agent does not have power over the principal’s medical decisions. So, while they can pay for medical bills, they cannot make decisions in regards to medications.
Benefits of a POA
In general, there are many things you should consider doing when starting your estate planning journey. There are wills, trusts, beneficiaries, retirement plans, and even control of your assets. Because there are many moving parts to your financial planning, there are a variety of benefits to designating a power of attorney. In general, it gives you peace of mind that things are taken care of in case you are ever incapacitated.
Similarly, it also allows you to designate a person you trust to take care of your finances and medical needs instead of someone who may not have your best interest at heart. Finally, it allows you to dedicate different people to different aspects of your life. If you trust your spouse to make good medical decisions but want your son to make the financial decisions, you are able to separate them and give them each a different power of attorney.
Set up Your Power of Attorney Documents
There are many different aspects to consider when setting up a power of attorney document. Though you are able to do it yourself it is generally not recommended because an improperly prepared POA may leave room for interpretation which can cause confusion over your directives. This is why it is recommended that you set up your power of attorney documents with an attorney present. They will be able to walk you through the process and ensure all of your wishes are correctly attributed.
Ready to begin your estate planning? Attorney Mark E. Hall can assist you with your estate planning including how to decide what power of attorney document you need. We have helped thousands of people plan their estate and set up powers of attorney. Contact us today at (480) 495-6963 to set up a consultation or you can complete our online contact form.