Power of Attorney
A power of attorney permits you to grant powers that normally only you could exercise to another individual. The individual to whom you give these powers is known as your agent or “attorney in fact”. Despite the name, there is no requirement that this person be a licensed attorney.
It is also noteworthy to mention, not all powers of attorney are created for estate planning purposes. Therefore, their individual effectiveness may rely heavily on the way the document was crafted and its original intended use. Powers of attorney designed for estate planning purposes is usually created as a “durable” power of attorney.
Powers of attorney that are not durable cease to have any effect when you become incapacitated. In the context of estate planning, this is often the exact time at which it becomes necessary for a trusted friend or family member to have this power.
There are two types of durable powers of attorney that are executed for estate planning purposes.
A durable power of attorney for financial matters allows for the person you designate to carry out your financial affairs during your period of incapacity.
A durable power of attorney for health care gives your designated person (sometimes called a “proxy”) the power to make health care decisions on your behalf.
The powers that you grant to your attorney-in-fact in each of these documents may be as broad or as narrow as you like. For example, in the durable power of attorney for finances, the attorney-in-fact could be given only the power to pay your bills, or could be given complete control over all your financial decisions.
Additionally, the powers that you give can take effect immediately, or can “spring” into existence at the time of your incapacity.
It is important to note that powers of attorney are not a substitute for a will or a living trust.
In fact, all powers of attorney cease at death, and therefore have no effect on the distribution of your assets. The only exception to this rule is that a health care power of attorney may include a provision extending instruction with respect to treatment of ones body after death.
Powers of attorney do not individually satisfy your estate planning needs, but each of these documents act as an essential component of an overall more comprehensive estate plan.
Read more in our blog about powers of attorney, or follow the links below to drill down on estate planning, health care, or financial powers of attorney