What Power of Attorney Is

Have you heard about ‘Power of Attorney’? Why do people have it? You may not know it now, but it could be what you need today. To begin with, the power of attorney is a legally effective document that states your agreement to give somebody else (a relative, a friend, or an employee) an authority to make special decisions or to do several things on your behalf. It is recognized in common law and civil law systems. It could be a legal or a business matter.

If you get a power of attorney for your own use, you could call yourself a ‘principal,’ a ‘granter,’ or a ‘donor’ (of power). The other person to whom you are intentionally providing powers or authority is called the ‘agent’ or the ‘attorney-in-fact.’ Take note that just because the term ‘attorney’ is used does not necessarily mean that you need to give an authority only to a lawyer. Your agent or attorney-in-fact could be of any profession, not necessarily a lawyer.

There are many things you should understand about power of attorney. First, execution of the power you bestowed does not mean you no longer have to make the decisions. Take note that the power of attorney just mandates your agent to act for you. For instance, if you are suddenly hospitalized even for a short period and you need to continue your important banking transactions, you need to get a power of attorney and appoint anyone you trust to do errands for you.

The agent should just follow your instructions or directions especially if you are still very much capable of making your own decisions. Thus, it is like you are just sharing your authority or power with another person. In the same way, you could instantly revoke the authority you gave your agent anytime you like especially if you think you are dissatisfied and are dubious about his or her performance of the duty you gave him/her.

There are instances when the power of attorney takes other functions. The authority usually provided by the legal services specifically for the elderly could be categorized as a durable power of attorney. It is somehow different from the usual and normal power of attorney used. ‘Durable’ simple means the agent is mandated to continue making decisions for the principal especially if the latter becomes incapacitated. However, the law states that the agent should be obliged to act only in the best interest of the principal. Thus, the money and properties involved must only be used for the benefit of the principal.

If you need to establish a durable power of attorney, take note that you are providing your agent the following authority: withdrawing your money from bank accounts and spending it; selling your property; and pursuing legal actions and insurance claims. If you are uncomfortable with the setup, you may decide not to get a durable power of attorney or any form of power of attorney at all. However, when you suddenly become mentally incapacitated, the court could appoint a conservator or guardian for you.

Power of Attorney: Should You Get One?

While it is much easier to put off getting a power of attorney than to create one, you should not take any chances. Before it is too late, you have to designate a trusted person to act and make decisions on your behalf. Should you wait until you become mentally or physically disabled and regret later for not doing it earlier? If you want to protect your assets and secure your financial future, then preparing a POA is one of the best decisions that you will ever make in your life.

A lot of people have wrong notions about powers of attorney. They think that only the elderly as well as those with massive assets are only the ones who must draft power-of-attorney forms. However, the need for POA is not limited only to these groups. Even younger people and those who have only a few assets may create powers of attorney. A POA suits people who want to have the peace of mind knowing that someone they trust will act on their behalf regarding financial or health care matters when they are no longer able to do so.

It is impossible to underestimate the importance of POA. This legal document comes in handy when you incur an injury or develop a life-threatening disease, both of which render you incapable of making decisions on your own. In case you become physically or mentally incapacitated, how could you possibly pay your bills and mortgages or conduct transactions at the bank? Imagine your home getting foreclosed because you are physically unable to pay off your home loan while you were undergoing medical treatment in a hospital. If you do not have an attorney-in-fact, you might get into trouble with the law.

You don’t want that to happen, right? So it is a wise move to have someone take care of your properties while you are away.

What will happen if you don’t have an attorney-in-fact and you are incapable of acting or deciding for your affairs? The court will then use its discretion in deciding who will be in charge of making decisions regarding your finances, properties, or health care. A judge will choose a person who will serve as your legal representative, and this agent may be someone who you do not fully trust. If you want to have a say on who will take care of your affairs when you become incapable of doing so, then it makes perfect sense to create a power-of-attorney document.

When is the best time to get a power of attorney? The answer is simple: now. It is because a POA is designed to protect yourself and your assets when the unexpected happens such as a debilitating illness or a serious injury. Thus, you will never know when a POA becomes necessary. Having said that, it pays to create it as soon as you can so that you avoid the conflicts or hassles that might arise should crucial decision-making has to be made and you are unable to do it.

How Much Power of Attorney Should You Give to Your Attorney-in-Fact?

One of the most important considerations in creating a power of attorney is how much power you must grant your attorney-in-fact or agent to protect your properties, finances, and interests from abuse. Since the courts do not regulate powers of attorney, the powers may be misused by an attorney-in-fact. As a principal, you do not want this to happen, which is why you must choose carefully the powers you are going to give to your agent.

You have to decide one or more of the following tasks that your attorney-in-fact will carry out on your behalf from time to time:

• manage your properties

• preparing and filing income tax returns

• making decisions regarding health care

• do transactions at the bank and pay your bills

• handle your retirement and insurance benefits

• collect your social security benefits

• handle your legal claims

You have two options when deciding how much authority you are going to allow to your agent. You can give either a general or a limited power. The right choice depends on your needs and preferences when it comes to managing your affairs.

General powers of attorney provide more authority to an attorney-in-fact than the limited type. Because the control granted to an agent is limitless, the general type has a wider scope than the other one. This means that the agent enjoys the same amount of privileges and access to the assets of the principal. For example, the agent can have access to the safety deposit box of the principal and transfer sales or investments, among other powers.

Entrusting all your assets and personal affairs as a principal is like entrusting your life to your attorney-in-fact. Your agent’s decisions regarding your estate will have a direct impact on you, considering the broad freedom granted by general powers of attorney. The agent will decide, for example, where your money and investments will go as well as the kind of nursing home where you will stay.

Simply put, your attorney-in-fact will be in charge of everything that concerns your life as soon as you become mentally incapacitated. That being said, you must make sure that you appoint someone who is worthy of your trust. Your agent can be your relative or trusted friend who can handle well all concerns regarding your finances and other affairs.

However, if you are not confident about entrusting everything to someone else, you may consider giving a number of limited powers of attorney rather just one general power.

As the term implies, limited powers of attorney grant limited and specific control of an attorney-in-fact over the estate of the principal. With such type of power of attorney, a principal can prepare for certain situations without giving full authority to his or her agent. There are various types of limited powers of attorney. Your choice depends on what aspects of your life need important decisions from someone when you are not able to make decisions for yourself.

Some of the limited powers of attorney involve health care, real estate, medical, and financial.

Why Do You Need to Prepare a Power of Attorney?

A power of attorney (POA) is a very essential legal document. However, before you can fully understand its importance, it is best to know its purpose first. In general, the goal for creating a POA is to protect your interests and manage your estates when you have reached a point when you can no longer do them on your own.

Convenience is one of the advantages of having a power-of-attorney document. Take this scenario as an example: you are selling a property and in a few weeks, you are going to be out of the state for a business purpose. Now, you might be worried that an interested buyer would visit your home while you are away. If you have authorized someone to take charge of your property in your absence beforehand, then you can rest assured that the sale would be properly negotiated and hopefully, a deal would be closed even if you are not present. In cases like that, you may opt to get a durable POA that specifies a limited period when the authorization is effective. That document must also indicate the particular terms like your preference when it comes to the minimum sale price.

A power-of-attorney document can also save you from hassles as well as unnecessary expenses and waste of time in certain situations. Imagine how you can manage all your legal affairs on your own when you are mentally or physically incapacitated because of a serious disease or injury. That is simply impossible. So you need someone who can act as your legal representative when you are unable to make legal decisions for yourself. For example, you need to obtain a mortgage to be able to borrow money to pay for your hospital and medical bills. If you appoint someone as your attorney-in-fact, that person can sign the mortgage on your behalf.

As a result, you can get the money necessary for paying your bills. Getting a POA is a better choice compared to having a conservator, which is a guardian assigned to you by the local probate court. Probate hearings usually take time to complete, not to mention that you are going to incur more expenses than you would with a POA. Of course, why would you waste your time and money when there’s a better alternative out there? Your POA can do practically any transaction on your behalf.

Powers of attorney are also intended to avoid certain situations that may cause the court to choose a conservator or a guardian to act on everything on your behalf. When the court does that, you won’t have any say as to who it will appoint as your guardian—it may be one of your family members or someone else. Once the court has chosen a guardian, he or she has the authority to make decisions for you such as which nursing home where you will stay and what to do with your properties.

With a power of attorney, you can be confident enough that someone you trust will decide based on your wishes and your best interest.

What Is The Durable Power Of Attorney For?

The power of attorney is a legal document that authorizes a person or organization to act on financial and business matters affairs of a person referred to as the principal. The person or organization that receives authority is called the agent or the attorney-in-fact.

The durable power of attorney is called such, since the attorney-in-fact would continue to have authority and act on behalf of the principal, even if the principal becomes incapacitated. Though the durable power of attorney has such characteristic, it is still important for the document to state that it would remain valid even if the principal becomes incapacitated or disabled.

The durable power of attorney can be useful in situations when the principal is seriously ill, disabled, and if their property is modest but do not need setting up fund trusts or guardianship. This is also favourable for married couples whose account is joined.

The durable power of attorney is also referred to as the health care power of attorney. In many situations, the health care power of attorney is different from the agent who would oversee financial and business matters. The attorney-in-fact who is given the durable power of attorney is required to make decisions related to the principal’s health like stopping life support or performing surgery.

Laws on how the power of attorney should be created are different on each state. For example, in South Carolina, the preparation for the power of attorney is the same as preparing for a will. In California, notarization in the documents is important but this may not be the case in some states. This is why it is important to have knowledge on legal matters and employ legal assistance when making the document.

A possible problem with the durable power of attorney is that the principal may not want the attorney-in-fact to take specific liberties. The principal could specify in the document what specific decisions the durable power of attorney can make. Aside from that, the document could specify that the durable power of attorney could take effect in the event the principal becomes disabled.

The durable power of attorney could cover different decisions and responsibilities, aside from health care decisions, like:

• Providing gifts which can play a major part in estate tax planning.

• Accessing safe-deposit boxes.

• Signing tax returns, IRS documents, and settling tax disputes.

• Pursuing legal matters or litigation on behalf of the principal.

• Collecting benefits from health and other insurances on behalf of the principal.

• Setting up or amending trust funds.

• Revoking the power of attorney.

Laws covering the power of attorney vary in each state. For example, if the attorney-in-fact is the spouse and they get a divorce, the power of attorney is terminated. The court may also rule the document to be invalid, especially if the principal is proven to be incompetent when the document was signed. The principal could also revoke it, as long as he is mentally sound.

The power of attorney could also be terminated if the attorney-in-fact becomes incompetent, unavailable or dies. To avoid problems, the principal could identify an alternate attorney-in-fact and state it in the document. Make sure to identify the situations when the alternate would take responsibility.

Medical Issues And Power Of Attorney

Anything can happen and as much as we want to plan our day, we cannot really foresee the future. So what happens when we suddenly figure in an accident? Who will be at hand to take care of our business dealings and other personal issues? Can power of attorney fix things?

The lack of an appointed person to take care of the legal matters when one is dying often becomes a problem because no one anticipates this happening. And who can blame them? Nobody would want to go morbid and prepare for something like dying from an illness. Death is easier because the will (as in the last will and testament) will take care of the legal matters post-mortem but dying is another thing altogether. This is especially true with people who are gravely injured and cannot make decisions for themselves like for instance when they are under comatose or when they cannot speak, move or are invalid.

Power of attorney is one of the ways that you can appoint a representative for you should something happen to you. Although power of attorneys are often given for a specific period of time, some principals, or those who are giving the power of attorney, can extend the contract until something happens to them like when they become terminally ill or when they become gravely injured. This however should be plainly stated on the contract for the power of attorney. Otherwise, it will be deemed invalid by the court.

The principal can also choose to appoint an agent or the attorney in fact (the person to whom the power of attorney is given to) to be his or her representative when they become ill. Some, in fact, appoint people to act on their stead while they are in the hospital and to make any medical decisions in their stead like when they need to pull the plug in case of a comatose. This is what is often called the “Health Care Power of Attorney,” which empowers the attorney in fact to make health care decisions for the principal or the grantor, even something as sensitive as terminating the hospital care in cases when machines are the only one keeping them alive.

It includes the power to give consent or to refuse a medical procedure for the grantor. In some states like in New York, this is a requirement. A separate document is needed as stated by the Health Care Proxy Law by the State of New York, appointing your health care agent so to speak. Medical hospitals will not honor the provisions stated in the living will. It can state the medical wishes of the person but it does not appoint anyone from making the decisions for them.

For people with mental illness, they can prepare the Psychiatric Advance Directives or PADs, which grants the proxy to dictate psychiatric care for the patient as they cannot make the decisions for themselves with regards to their wellbeing.