A power of attorney is a legal document that allows an individual to appoint another person or entity to act on their behalf to make financial or health care decisions. The person who creates the power of attorney is known as the principal and the person granted the authority over the affairs is the attorney-in-fact (or in some states the “Agent”). A power of attorney is in effect only as long as the principal is alive and it can only be created by a principal who is mentally competent. If you lose mental capacity and don’t have a power of attorney in place, you may cost your family thousands in legal fees when they have to get a conservatorship or guardianship before they can make decisions for you.
Am I giving all of my power away by making someone my attorney-in-fact?
You may have heard that once you have appointed a durable power of attorney you lose control of any decision making and how your assets are used. This is not true at all. You still have all of the powers that you had prior to creating the power of attorney and you can always revoke the power of attorney as long as you are competent. The power of attorney is designed to allow a person to step into your shoes to make financial decisions in the event that you are unable or unavailable to manage your financials. One example of this could be that you are out of the country and need your power of attorney to pay a bill for you that is due. Another may be that you are out of town and need the power of attorney to sign real estate closing documents on a house that you are purchasing. In most cases, the power of attorney will not act until you are no longer mentally capable of managing your personal, legal, and financial affairs. An example of this could be that you have gotten in a wreck and suffered a brain injury, and you need someone to manage your finances until you recover.
What is a Medical Power of Attorney?
In addition to appointing a person to make financial decisions through a Power of Attorney, it could also be used to allow a person to make medical decisions for you if you are ever unable to. Medical decisions for the principal can take place when the person has become unable to make those decisions for themselves due to incapacitation. This can also be called an advanced care directive and it grants authority to the attorney-in-fact to make medical decisions for the principal. It does not grant any other authority or powers to the attorney-in- fact other than making decisions related to the healthcare needs of the principal. You have probably heard that this is the person who makes the decision to “pull the plug.” While this is true, there are also many other situations where this person may make decisions for you.
When can I execute a power of attorney?
Anyone over the age of 18 can execute a power of attorney. A power of attorney needs to be prepared before you lose mental capacity. The power of attorney completed in time ensures that your personal affairs are attended to when you no longer have the ability to manage them on your own. This includes legal and financial matters. This can prevent financial and family problems from occurring, especially if there has been inadequate estate planning by you, the principal.
Is a power of attorney only for when I am no longer competent?
A power of attorney has often been thought of as a tool that is utilized to administer an individual’s affairs only when that person becomes incapacitated or is unable to effectively manage their own finances. Some people believe that a power of attorney is only used as a last resort when people can no longer make decisions for themselves. The reality is that a power of attorney is a very flexible legal instrument that can be utilized in many different scenarios to assist people in both day-to-day affairs as well as complex legal arrangements. An attorney-in-fact is not only appointed to handle the affairs of someone who has become incapacitated but can be appointed to act on the behalf of someone to handle a transaction. If a person does not have sufficient knowledge to manage a certain financial or legal matter, they can appoint an agent to handle that particular transaction on their behalf.
