A power of attorney is a legal document in which the principal (the person giving the power) appoints an agent (the person accepting the power) to handle the principal’s finances and property. Powers of attorney are considered “durable,” which means the power of attorney stays in effect even if the person who gives it becomes incapacitated, unless the document directs otherwise. However, powers of attorney can be used in many situations, and can be tailored to give narrow or sweeping authority to the agent, depending on the principal’s needs.
When choosing an agent, consider the individual’s trustworthiness, his or her ability to handle finances, and the geographic proximity and availability. Your agent will have access to your money and property; therefore, be sure you are choosing the best individual to act as your agent. A power of attorney may also include health care powers, so that your agent can make medical decisions when you are unable to do so. In many instances, principals execute separate financial and health care powers of attorney, simply because they want different people making decisions about their finances versus their health.
You may appoint more than one agent or choose a primary agent and one or more alternates. Multiple agents may act independently of one another or be required to act together. If you do not specify in your power of attorney that you would like the agents to act together, then the law provides that multiple agents will be able to act independently of one another.
It is up to you how much power you wish to delegate to your agent. You may execute a broad, sweeping power of attorney or a very limited power of attorney. The powers delegated can include the power to deal with money and property. Such powers might include the power to pay bills, receive income, deposit and withdraw from bank accounts and brokerage accounts, buy and sell investments, buy and sell real estate, sign tax returns, open and close accounts, and other steps to manage wealth.
Powers of attorney usually become effective immediately. However, some individuals only want their power of attorney to become effective upon the happening of some future event, like if they become incapacitated and unable to make their own decisions. Even if you choose to have your power of attorney effective immediately, you still retain all of your own power and authority to deal with your finances and property, even property in the possession of the agent. Once your agent does start handling your affairs, the agent must act in your best interest. A power of attorney can be revoked by you at any time, as long as you are mentally competent to do so. A power of attorney is valid only while the principal is alive – the authority terminates upon the death of the principal.
If you become incapacitated without a power of attorney in place, and leave assets or property in need of management, a guardian and conservator will need to be appointed to make decisions for you. This process can be time-consuming and expensive, and involves filing a petition with the probate court, and a hearing before the probate judge.
Powers of attorney are governed by state law, so it is important to see an attorney to ensure that the form you are signing as principal complies with the law of state in which you sign it, and is compatible with the laws of any other states in which you may reside.
Powers of attorney are not just for the elderly. Disability can strike at any age, a principal need not be disabled or incompetent for a power of attorney to be effective. This simple and inexpensive legal document can save your loved ones time, money, and stress, and provide you with peace of mind that your needs will be met should you be unable to care for yourself.