If you're ever unable to take care of your own business or make your own decisions, a power of attorney (POA) protects you. It authorizes another person to legally act in your place. In this situation, the word "attorney" does not mean the person has to be an attorney-at-law. It can be anyone.
A POA is a simple document that need not be filed with the court. You can write your own POA, but you might want to have a lawyer draft it for you because the laws differ somewhat from state to state.
Understand Who's Who
POAs are legally binding on three parties: you, the person to whom you're giving power, and any business or other entity that honors the directions of the POA.
As author, you are the principal in the document. The person to whom you're giving power is your agent, sometimes called an attorney-in-fact. Third parties honor your POA by allowing your agent to act on your behalf. If you choose your spouse as your agent, and if you later divorce, the divorce voids your POA in many states.
Decide What Powers to Give
POAs can cover a broad range of issues, and the powers you grant are entirely up to you. You can appoint an agent to make only health care decisions for you if you ever become incapacitated. This is a medical POA.
You can also use a POA to appoint someone to take care of personal business for you. If you grant a limited POA, you authorize your agent to deal with only one or two issues, such as managing your bank accounts and paying your bills.
A general POA usually gives your agent the right to take care of all your business. You can place restrictions in the document. For example, you can state that your agent can't make gifts to anyone with your money or assets.
Different Periods of Effectiveness
If you want your agent to have authority to act for you for only a limited period of time, you can include an ending date in your POA. You might do this if you're going to be in the hospital or if you're traveling out of the country. You can also revoke your POA at any time by writing a revocation document. Your death automatically terminates your agent's powers.
You can create an open-ended POA, but it's important that you include the right language to make sure it's effective in case you become incapacitated. A durable POA goes into effect immediately, and continues to be effective if you become incapacitated. A springing POA doesn't go into effect unless you become incapacitated.
Put Your POA in the Right Hands
In order for your POA to do any good, people have to know that it exists and that it expresses your wishes. If you create a medical POA, make sure your doctor has a copy. If you're granting a limited or general POA, distribute copies to your banking institutions or any other parties who are obligated to allow your agent to act for you. You and your agent should also keep copies.
An Estate Planning Lawyer Can Help
The law surrounding powers of attorney in the estate planning process is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact an estate lawyer.