Will your family be able to pay your bills if you were unable to? Even if you tell your doctor what kind of medical care you want, will your family know what to do?
Preparing a power of attorney (POA) today can save time, money and most importantly, heartache for your family and friends in the future.
What is a Power of Attorney?
POAs ensure that your wishes are followed if you are no longer able to communicate them yourself. It names someone you trust to make important decisions and take actions for your health, finances and business matters.
You can appoint anyone as your POA, but most people choose their spouse, a family member or trusted friend to be their representative, or agent.
Types of POAs and When You Might Need Them
There are several types of POAs and each gives your agent a different level of control. We’ll look at the 5 main types but, note, there are others including financial, care and custody of children, sale of real property and sale of vehicles.
1. General Power of Attorney
General Power of Attorney gives someone you designate legal authority to handle your affairs when you are physically or mentally unable to do so or when you are traveling out of the state or country. The agent can take a wide range of actions on your behalf such as:
- Making medical decisions
- Taking legal actions
- Making business decisions
- Buying, managing and selling property
- Handling banking transactions
- Entering safety deposit boxes
- Filing tax returns
- Settling claims
- Exercising stock rights
- Entering into contracts
- Tending to government benefits
2. Limited Power of Attorney
Limited Power of Attorney gives someone you designate legal authority to handle your affairs only in specific situations and may be limited to specific periods of time like when you are traveling out of the country or when a spouse is deployed overseas and may include:
- Making financial decisions
- Managing business transactions
- Managing banking transactions
- Making estate planning decisions, including gifts
- Entering safe deposit boxes
- Handling government issues and U.S. securities transactions
- Collecting debts
- Borrowing money
- Selling or manage real estate
- Selling personal property
3. Health Care Power of Attorney
Health Care Power of Attorney designates your agent to make health care decisions on your behalf if you are unconscious, mentally incompetent or unable to do so yourself. The POA empowers them to make sure you are getting the type of care you want and becomes effective only when you are incapacitated.
Note: Most organizations won’t allow your agent to act on your behalf without a doctor’s confirmation of incapacity.
Note: if you have a living will, it is also important to have a health care power of attorney document. A living will lets a doctor know what types of medications you want but does not authorize anyone to make decisions for you such as keeping or taking you off life support. You want to keep the original of your health care POA in your records and give a copy to your agent, doctor and health insurance company.
4. Durable Power of Attorney
Durable Power of Attorney is made “durable” by specific language in the document and any POA can be made durable. Unless a POA is made durable, your agent can only exercise a power that you are able to, for instance, if you are in a coma and can’t sign a contract your agent can’t sign it either. On the other hand, a durable POA may allow your agent to carry out the powers you granted whether you are disabled or not. So, choose your trusted agent wisely!
5. Springing Power of Attorney
Springing Power of Attorney is a type of durable POA that only goes into effect under certain conditions such as military deployment, physical disability or mental incompetency. Since some people may not be comfortable giving someone else power while they are currently healthy, the Springing POA will only go into effect when triggered by a specific condition, event or date.
Note: there may be potential problems with this type of POA. Determining someone’s mental incompetence can be subjective and may delay an agent’s ability to act on your behalf. And, since Springing POAs are not accepted in all states, court costs to ajudicate disagreements can get expensive.
POAs have specific purposes depending on your needs. When in doubt, consult a lawyer to determine the best POA for your situation. And have a plan B. Your designated agent or organization may not wish to accept this vital role on your behalf.