You Need a Power of Attorney
Giving someone your power of attorney (POA) has been likened to giving a trusted person a spare set of keys to your house or car. If a problem arises — for example, you lose your keys — your interests are protected. Otherwise, you’re still in control. And just as you can take back your spare set of keys, you can also revoke a power of attorney.
Basically, a power of attorney gives someone the legal ability to act on your behalf in ways you specify. Obviously, you should only give this power to a person you have complete confidence in, such as your spouse, adult child, or trusted attorney. A POA can be as simple as giving your child the legal authority to pay your bills and endorse your checks if you are no longer able to do it. Or it can be more detailed, such as enabling your child to pay the bills and sell a parcel of real estate that you own.
Different Types of POAs
If you’re considering granting a power of attorney, here are the basic types available:
General power of attorney - This grants a wide range of powers to act on your behalf — basically, to do whatever you can do. In the event that you became incompetent or incapacitated or pass away, the POA would automatically be revoked. Because of the sweeping nature of this power, it should be used sparingly.
Health care power of attorney - This authorizes another person to make medical decisions on your behalf and remains in effect even if you have become mentally incapacitated. This type of authorization must be signed in front of witnesses and notarized in order to be valid. The agent (sometimes called the attorney-in-fact) that you appoint must be an adult, and cannot be a person who is paid to provide health care to you. As with other forms of POAs, you can specify the decisions you are authorizing your agent to make, or give them the same authority you have to make decisions for yourself.
Special power of attorney - As its name implies, a special POA gives your agent power to act only in specific situations. For example, let’s say you need to travel for a long period of time when certain matters need to be concluded at home, such as selling your car.
Springing power of attorney - A springing POA is an instrument that can be written so that it takes effect only if you become incapacitated. You need to be very clear when defining what circumstances will trigger a springing POA.
Durable power of attorney - A durable power of attorney can remain in force even if you become incompetent or incapacitated. This POA generally requires that a family member or close relative be appointed as your agent. It differs from a general POA in that it conveys limited powers to the agent and can be put in place for longer periods of time. It can be desirable for some individuals to separate the duties granted by durable POAs into two types –
A Durable Financial POA Can Take a Load Off Your Mind
Here are some of the duties you can authorize your agent to handle with a durable financial POA:
- Pay bills and the bills of your family, using available assets.
- Pay real estate taxes, maintain your home and buy or sell real estate.
- Manage retirement funds.
- Make decisions necessary to operate your business.
- Calculate, file returns and pay your taxes.
- Buy or sell insurance.
- Handle banking and investing money and collecting government benefits, such as Social Security.
medical and financial responsibilities. For example:
1. A durable medical POA (Health Care Power of Attorney) authorizes an agent to make health care decisions. You can give your agent the same authority to make decisions as you have yourself, or you can limit the authority. This POA becomes effective when a doctor states in writing that you’re not able to make your own medical decisions. You may want to include an advance directive (living will), which states your wishes concerning life support, if it becomes necessary.
2. A durable financial POA names an agent to carry out your financial responsibilities described in the right-hand box. This type of POA can save your family lots of money and avoid many problems if you become incapacitated.
When Does the Power End? A durable POA ends automatically upon your death. So if you wish to have your agent also wind up your affairs after your death, you need to create a will and name that person as your executor. A durable power of attorney can also end if:
You are mentally competent and choose to revoke the POA.
A court concludes that you signed the authorization while you were incompetent, under undue influence, or a victim of fraud, and therefore renders the POA invalid.
The agent you choose is unavailable, unless an alternate is named.
You get a divorce. This applies if your spouse is your agent and you live in one of several states where a divorce automatically terminates the POA.
If You’re Married: Your spouse has some authority over property that you own together. He or she can pay bills from a joint account and manage investments in a jointly owned brokerage account. But in most states, including, North Carolina, spouses are limited in their abilities to buy or sell co-owned property without consent of both parties. And if any property is in your name only, your spouse generally has no legal authority to act without a durable power of attorney.
Getting Your Ducks in a Row
Whether young, middle-aged, or approaching the golden years, everyone needs to give some thought to the future. Obviously, the need increases as you get older. An arrangement such as a power of attorney is a simple way to smooth out bumps before they arise. Contact your attorney to learn more.
Source: TrustCounsel’s January eNewsletter from BizActions.