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How to create a power of attorney that protects your interests

by Legacy Plan
September 9, 2023

A power of attorney – a legal document that gives someone you trust the power to make decisions on your behalf – can play a key role during your lifetime in a number of ways.

This powerful piece of paper that enables a person of your choosing, known as an agent, to make decisions in your best interests is among your most important estate planning documents.

For example, as a legal document, a financial power of attorney can allow your agent to manage your finances, pay your bills and access your bank accounts. Or, it can allow your agent to make decisions about your property, such as selling your home or car if necessary, or initiate action for you in legal matters, such as filing a lawsuit or defending a claim. A health care power of attorney, meanwhile, can empower an entrusted loved one or friend with the authority to make medical decisions for you, such as consenting to surgery or withdrawing life support.

It’s widely agreed that having a power of attorney in place can give you peace of mind knowing that your affairs will be taken care of if you become incapacitated. It can also help to avoid the need for a court-appointed guardian to act on your behalf, which can be a lengthy and expensive process.

What is a power of attorney?

stack of legal documents with a pen on top

A power of attorney, also known as PoA, is a legal document that allows an individual to appoint someone else to make decisions and act on their behalf. This appointed person, called the agent or attorney-in-fact, is authorized to make decisions on various matters such as financial transactions, legal affairs or health care choices based on your specific instructions, intentions and limitations. It provides pre-authorized approval for a surrogate decision-maker to step in when you are unable to take care of your own affairs.

What types power of attorney are there?

There are different types of powers of attorney tailored for specific purposes. A general power of attorney grants broad powers to the agent and allows them to act on behalf of the principal in various matters such as managing bank accounts, signing contracts or filing taxes. On the other hand, a limited power of attorney grants specific powers for a particular purpose; for example, if you are unable to attend a real estate closing due to illness or travel constraints, you can appoint someone as your agent just for that specific transaction.

When it comes to health care decisions during incapacity or medical emergencies, a durable power of attorney for health care allows your chosen agent to make medical decisions on your behalf based on instructions outlined in the document. This ensures that your wishes regarding treatments and end-of-life care are respected even when you cannot express them yourself.

When considering a power of attorney, it is important to understand the different types that exist. Each type serves a specific purpose and grants varying levels of authority to your chosen agent. They include:

  • General power of attorney: This type of power of attorney gives your agent broad authority to act on your behalf in various matters, such as managing your finances, deciding on legal options and handling real estate transactions. It is commonly used for situations where you are unable or unavailable to make decisions yourself, such as during extended travel or illness. Unless specified otherwise, a general PoA is terminated if the principal becomes incapacitated.

  • Limited power of attorney: As the name suggests, a limited power of attorney grants your agent specific powers for a particular purpose or within a defined timeframe. A limited power of attorney often becomes void once that purpose is fulfilled. For example, you can appoint someone as your agent solely for the purpose of selling a property on your behalf while you are abroad.

  • Durable power of attorney: A durable power of attorney remains or goes into effect if you become incapacitated or unable to make decisions due to physical or mental health issues. The authority of a durable power of attorney can be either general or limited. A limited or general durable power of attorney can be made effective immediately after being signed and notarized, or spring into effect under conditions specified in the document, which typically include incapacity.

Understanding these different types will help you determine which one suits your needs best when planning for potential incapacity or ensuring smooth management of affairs when necessary. It is crucial to consult with an experienced lawyer specializing in estate planning and guardianship laws within your state to ensure that the power of attorney adequately addresses all relevant aspects related to finances, health care and other important matters.

Remember that each person's situation may vary, so it is essential to assess individual needs before deciding which types best fit their circumstances. By choosing the appropriate forms of power of attorney, you can have peace of mind knowing that your wishes will be respected and that a trusted person is empowered to act on your behalf when needed.

How do I create a power of attorney?

Creating a power of attorney typically involves specific steps. You must first choose who will act as your agent – this person should be trustworthy and capable of handling the responsibilities involved. Next, determine what powers you want to grant to your agent; this may include things like managing bank accounts or making health care decisions. Once these decisions have been made, an experienced lawyer can draft the power of attorney document to ensure it complies with all legal requirements.

In many jurisdictions, this involves having witnesses present during the signing process. Some regions may also require notarization or other additional formalities. It's important not to overlook these steps as failure to comply with legal requirements could render your document invalid.

Creating a power of attorney is not necessarily a one-time task. Your PoA may require future revisions if there are any significant changes in your circumstances or if your chosen agent becomes unavailable or unsuitable for the role. By keeping your power of attorney up to date, you can ensure that your instructions fit your current situation and that you have a reliable support system in place.

Who can I appoint as my agent?

an elderly man and younger man going over power of attorney documents

When it comes to appointing an agent for your power of attorney, it's important to choose someone you trust explicitly. While the specific requirements may vary by jurisdiction, generally speaking, the person you select should be an adult and legally competent. Typically, individuals choose family members or close friends as their agents, as they are often the ones who know them best and can act in their best interests.

One common choice for an agent is a spouse or life partner. This person usually has a deep understanding of your wishes and values and can make decisions on your behalf with that knowledge in mind.

They are also likely to have access to crucial information about your finances and health care that would be beneficial when making important choices. Another option is appointing an adult child as your agent.

This can make sense if they are responsible and have a good grasp of your preferences. However, it's essential to carefully consider any potential conflicts of interest they may have when making decisions about finances or inheritance matters.

If you don't have a spouse or adult children who fit the bill, you could also consider siblings, close friends or other trusted individuals who are familiar with your circumstances and whom you believe would act in accordance with your wishes. It's crucial to choose someone reliable and capable of managing the responsibilities associated with being an agent.

It's worth noting that some people may prefer not to burden their loved ones with these responsibilities. In such cases, professional fiduciaries such as attorneys or financial advisors can serve as agents.

These individuals have experience managing finances and making important decisions on behalf of others but keep in mind that their services typically come at a cost. Ultimately, the decision of whom to appoint as your agent is highly personal.

You need someone who will act according to your wishes if you become incapacitated while balancing this role with empathy and integrity. Considering factors like trustworthiness, shared values, knowledge of surrogate decision-making processes, familiarity with your finances and health care preferences, and overall competence can help you make an informed choice that aligns with your estate planning goals.

What happens if my agent becomes incapacitated?

In the realm of power of attorney, it's important to consider what happens if your agent becomes incapacitated. While we hope for the best, life has a way of throwing us curveballs, and ensuring that you have a plan in place for such situations is crucial. When your agent becomes incapacitated, it means they are no longer able to make decisions on your behalf.

This could be due to a serious illness or injury that affects their ability to think clearly or communicate effectively. In such cases, you might find yourself wondering who will step in and act as your advocate.

This could be due to a serious illness or injury that affects their ability to think clearly or communicate effectively. In such cases, you might find yourself wondering who will step in and act as your advocate.

When selecting an alternate agent, consider someone who knows you well and understands your values and wishes. Failure to designate an alternate agent in your power of attorney document could lead to a potential court-appointed guardianship. For example, if you are incapacitated and your named agent unable to serve, a court may step in to appoint a guardian or conservator – who could be a complete stranger – unless there's an alternate named in the original PoA document.

When does a power of attorney expire?

A power of attorney is generally effective only during the lifetime of the person who grants the power and becomes null and void upon their death. The agent's authority to make decisions under the POA terminates immediately.

After the principal's death, an executor, personal representative, trustee or court-appointed administrator takes over the responsibilities for managing their assets and estate matters. This individual could be named in a last will and testament, a trust document, or could be court-appointed if there is no will. It is possible for the agent under a PoA to also be the executor, trustee or administrator for the estate, but these roles are distinct and governed by different legal documents and rules. The appointment as an executor or administrator needs to be confirmed in a will or by the court, separate from the PoA.

Conclusion

Having a power of attorney in place is a crucial step in ensuring that your affairs are handled smoothly and efficiently in the event of incapacity. By appointing a trusted agent to make decisions on your behalf, you can have peace of mind knowing that your wishes will be respected and your best interests protected.

When creating a power of attorney, it is essential to carefully consider who you select as your agent. Choose someone who is responsible, reliable and capable of handling the responsibilities that come with this role.

Whether it's granting them authority over your health care decisions or empowering them to manage your finances, having confidence in their decision-making abilities is paramount. Remember that while drafting a power of attorney can be done without the assistance of an attorney, seeking legal counsel can provide invaluable guidance.

An experienced lawyer can help you navigate through complex legal requirements and ensure that your document is comprehensive and legally binding. By revoking or updating your power of attorney as circumstances change, you maintain control over who has decision-making authority and when they have it.

This allows for flexibility as life evolves and offers protection against outdated directives or situations where an agent may no longer be suitable. In the end, having a power of attorney is about taking proactive steps to secure both your personal well-being and financial stability.

It ensures that even if unforeseen circumstances arise causing incapacity, there will always be someone ready to step in as a surrogate decision-maker. Embracing estate planning tools like powers of attorney empowers individuals to face the future with confidence, safeguarding their interests no matter what lies ahead.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at legacyassuranceplan.com.

Phone - 844.445.3422
Email - info@legacyassuranceplan.com
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