Understanding the types of power of attorney and why choosing the right one is critical to ensure your estate is prepared
When most people begin planning for the future of their estate, they only tend to consider how their affairs should be settled at the time of their death. Just as important, is planning for the possibility that you may become unable to act on your own behalf while living. The usefulness of a Power of Attorney should not be overlooked when planning for the future of your estate. However, there are three primary forms of power of attorney that can be used for different purposes. During estate planning, it is important to know what those options are and how they can affect you and your loved ones.
What Is A Power Of Attorney?
As opposed to a will, which only takes effect upon your death, a power of attorney is a legal document used to give someone else the authority to take specific actions on your behalf while you are living. The need for a power of attorney can arise in the event that you are unavailable at a time when your presence is needed or if you become incapacitated because of physical injury or mental illness. The person creating the power of attorney is known as the “Principal.” The person whom the Principal selects as his or her agent is known as the “Attorney-in-Fact” (though the person need not be an attorney). If the person appointed as the Attorney-in-Fact cannot serve on behalf of the Principal, the Principal has the ability to name successors or multiple agents.
Limited Power of Attorney
A limited power of attorney gives someone else the power to act in your stead for a very limited purpose. For example, a limited power of attorney could give someone the right to sign a deed to property for you on a day when you are out of town. It usually ends at a time specified in the document.
General Power of Attorney
A general power of attorney is all-inclusive and gives your Attorney-in-Fact all the powers and rights that you have yourself. For example, a general power of attorney may give your Attorney-in-Fact the right to sign documents for you, pay your bills, and conduct financial transactions on your behalf. You could use a general power of attorney if you were not incapacitated, but still needed someone to help you with financial matters. A general power of attorney ends on your death or incapacitation unless you rescind it before then.
Durable Power of Attorney
A durable power of attorney serves the same function as a general power of attorney. However, if a power of attorney is durable, it remains valid and in effect even if you become incapacitated and unable to make decisions for yourself. In the event of disability and incompetency, the legal authority rests with the Attorney-in-Fact to handle financial matters, sell property and/or make healthcare decisions on your behalf. This makes the durable power of attorney one of the most important estate planning tools. Having one in place will help to avoid disputes over who the appropriate person might be to assume the role. Additionally, it helps to prevent the risk of financial loss due to the expensive court process of guardianship proceedings. A durable power of attorney will remain in effect until your death unless you rescind it while you are not incapacitated.
While one aspect of estate planning is determining the manner in which your affairs should be handled after death, it is equally as important to make plans for how you wish your personal healthcare and financial matters to handled in event you should become unable to do so while living. Knowing which type of power of attorney is right for you can be an overwhelming process, and having the wrong document in place can cause a host of problems for the ones you love. The experienced estate planning attorneys at Anselmo Lindberg & Associates are here to help ensure that you are prepared and that the power of attorney that is right for you is in place.