In a society where the law and legal matters are acquiring an ever increasing profile, legal terms like “power of attorney” have become everyday words used by doctors, banks and people in general. The fact is that although many people have a basic understanding, the full meaning of powers of attorney, for both persons signing them and persons acting under them, are largely misunderstood.
Let’s start with some basics. A power of attorney is part of an overall estate plan. A power of attorney is a document in which you give someone else the authority to make certain decisions and act on your behalf.
There are different types of powers of attorney and the one you choose will depend on the type of affairs with which you want assistance. The two main types are those concerning your finances and healthcare. This article is focused on powers of attorney for finances. The agent’s powers vary depending on your state’s law and how the power of attorney is written. Examples of these powers include spending your money, cashing and writing checks, selling your property, signing contracts for you and pursuing claims or legal actions. The person to whom you give these powers is called an “agent” or “attorney-in-fact.” You are called the “principal.” Just because the word attorney is used does not mean that the person you give authority to has to be a lawyer. Most state laws do not require it to be filed with the court in order to be valid.
Signing a power of attorney does not mean that you can no longer make decisions. Think of a power of attorney as giving someone a second set of keys. You will still have your own keys, but your agent will have keys, too. You are simply sharing your power with someone else. For example, you may be hospitalized for a brief period of time and need someone to deposit your checks in the bank or pay your bills. As long as you are capable of making decisions, the other person must follow your directions.
Don’t be concerned that your agent will “take over” or that you won’t be able to make your own decisions. You can take the agent’s keys back any time you want, by revoking the power of attorney, as long as you are not incapacitated.
Many state laws presume that a power of attorney is “durable,” meaning that your agent can continue to make decisions for you if you become incapacitated. This is important because in the event you become incapacitated, without a power of attorney, no one can act for you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that could be implemented immediately under a simple durable power of attorney.
If you are interested in investigating whether a power of attorney might be right for you, please contact us to discuss further.