Understanding Estate Law: What Type of Power of Attorney Do You Need to Grant?
The term ‘Power of Attorney’ or POA may sound all too official and there are some people who make the mistake of alluding it to state or federal government judicial dealings and whatnot. The reality of it all is that we have—maybe once or twice—applied the phenomena without coming into the full knowledge of it.
Say for instance: you’ve got an important meeting overseas and you can’t take your spouse and kids along (because surely it isn’t a vacation), you may need to discuss with your spouse or your sibling or parent and tell him or her why you need to travel and direct them to care of the kids on your behalf. What you’ve just exercised—although not legally recognized—is POA.
What is Power of Attorney?
A Power of Attorney is an official document wherein a person known as the principal or grantor designates legal authority to another person or persons, who will be referred to as agent (even though the person isn’t a lawyer), to perform duties when the principal is unable to make those authorities by themselves. The responsibilities of the agent in the POA can be general; from consenting to medical treatments of the principal or on behalf of the principal, buying or selling the principal’s estate, signing tax returns, or it can be limited to specific duties like buying an automobile alone. The agent can be just about anybody: a friend, a family member or basically, someone you trust will make the best decisions.
Granting someone a power of attorney does not mean you won’t be able to make decisions yourself. It will only become active in the event you are unavailable or mentally or physically unfit to make those decisions personally.
It is commonplace that institutions like financial firms and even hospitals hand out fill-in-the-blanks power of attorney forms that will require people to appoint their agent. There are also cases where you may draft your own form if the contents of the form handed to you do not meet your needs. In the event where it is difficult to handle your personal affairs and do not have power of attorney, a court will appoint one or more persons to act as your agent. These people are usually called guardians.
Therefore, the importance of signing a power of attorney form, what kind of power of attorney form do you want to sign, knowing whom you are transferring legal authority to and the functions he or she is to carry out that will be in your best interests cannot be overemphasized. The need for a probate attorney to be present is also crucial.
There so many types of power of attorney, but for the purpose of the topic, we will be looking at a select few powers of attorney you need to sign.
- Financial power of attorney. This type of power of attorney allows someone you delegate to have the legal authority to use your funds to make transactions on your behalf. As discussed above, your agent must be someone you trust since he or she is going to act on your absence. An absence, in this case, isn’t dead, but unavailability. The duties can your agent can perform in this type of power of attorney can be enormous which is why you need to closely look at what legal authority you are granting your attorney. If the power of attorney is given, it has to be recorded in the county clerk’s office along with the deed. In your unavailability, your agent may manage your estate, bank accounts, stocks, bonds, accept your social security packages, manage your insurance, manage your retirement and even pension. However, you can limit the duties of your agent to a specific task like selling a property alone and once it is done, you can revoke it.
- Springing power of attorney. This is an important power of attorney and must be carefully weighed on before making a choice. This form of power of attorney goes into full effect when you have been declared by physicians or a court to be mentally or physically incapacitated and power is granted to your agent to begin to act on your behalf, managing your estate and other personal effects. In this case, your agent should be someone who has full knowledge of all your personal effects and must be willing to take up the mantle and make the right decisions should you be unfit to do so yourself. The future triggering event should be specified when drafting the document. You could draft it in such a way that it takes effect when you reach a certain age, or when a future date occurs or even when a specific disability comes to the fore.
- Durable power of attorney. Unlike the others discussed above, this form of attorney delegates an agent to take full responsibility in managing your estate immediately and will remain in effect in the event of future mental incapacitation of the principal. This is perhaps the most important type of power of attorney—because you’re not only granting legal authority to your agent to manage your estate and invest your funds when you’re fit and can run checks on him or her, but even when you’re unable to do so. As the name suggests, this form of power is granted to your agent throughout your lifetime—from the moment it is signed. When preparing the document, you must list out the specific duties your agent should carry out and you should record the document with county authorities for it to take effect.
Granting a power of attorney is not the same thing as writing a will—as agent or agents ceases to be in full control of a principal’s asset when the principal dies. The power of attorney will then be revoked. It is impertinent to understand that you should not be pressured into making a choice for an agent. Decisions like this should always come naturally. You should choose an agent you can wholeheartedly trust will do the right thing. A legal counsel is also advised when drafting such an important document.