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Power of Attorney 101

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One thing we always ask potential clients is whether or not they have Power of Attorney over their loved one who has been injured. But what exactly is a “power of attorney”? It is a powerful legal document where you can designate someone you trust to make decisions on your behalf, should you become unable to make decisions on your own.

In each power of attorney, a person (the principal) chooses someone else (the agent, or attorney-in-fact) to act on their behalf should the principal become unable to handle their affairs. This can occur if the principal is out of the country, has prior commitments, or in situations where they may become incapacitated and unable to make their own decisions, as with elder care. There are several types of power of attorney, depending on how broad or narrow you want the agent’s powers to be. All types of powers of attorney can be terminated at any time by the principal if they are competent, and they all expire upon the death of the principal. The main types are outlined below.

General Power of Attorney

A general power of attorney allows the agent to make a wide variety of decisions on the principal’s behalf and is usually unlimited in nature. General powers include buying or selling property, handling bank transactions, filing tax returns, entering into contracts, settling claims, and exercising stock rights. More specific powers can be laid out if desired.

Special or Limited Power of Attorney

Some power of attorney documents can be set up for very specific situations. These include one-time financial or banking transactions or the sale of property. The agent has no authority to act on the principal’s behalf other than the specific transaction outlined in the limited power of attorney. These agreements typically expire after the special transaction has been completed.

Springing Power of Attorney

Another type of power of attorney is a springing power of attorney, which comes into effect in the future and only once a specific event has occurred. Whereas most other powers of attorney are effective as soon as they are signed, with a springing power of attorney, a principal can ensure the agent will not have any authority until they are deemed mentally incompetent.

Durable vs. Non-Durable Power of Attorney

If a power of attorney is durable, that means that the agent has the authority to act on the principal’s behalf through incapacitation or other disabilities. There is no set time period for durable powers of attorney, but they expire upon the principal’s death. Non-durable powers of attorney, in contrast, usually have a set time period, are for a particular transaction, and expire if the principal becomes incapacitated.

Medical Power of Attorney

This type of durable power of attorney gives the agent the authority to make health care-related decisions should the principal become incapacitated, even temporarily. The principal’s presiding physician has to sign off that they are incapacitated for the powers to be in effect. This can cause some issues, as each physician and person has their own definition of what “incapacitated” means.

Financial Power of Attorney

Another type of durable power of attorney is financial power of attorney, which allows an agent to make specific financial decisions, should the principal become incapacitated. This includes things like paying bills and taxes, investing, collecting retirement benefits, managing real estate assets, and hiring someone to represent the principal. Again, this type of power of attorney doesn’t go into effect until the principal is deemed incapacitated.

Things to Consider

When creating your own power of attorney, be sure to use an experienced attorney who will make sure the language and nature of the document suits your needs. Each state has different laws governing power of attorney documents, so be sure to look at your state’s requirements before setting up your power of attorney. It is critical to make sure you have an agent you trust, as they will be making important decisions on your behalf and handling your affairs. You have the power to give your agent as much or as little control over your affairs as you wish.