Important Considerations When Creating a Financial Power of Attorney

What are the ways to put your finances in order when time comes you are unable to do so? Setting up a power of attorney (POA) is one of your options when it comes to managing your daily financial affairs and transactions under certain circumstances such as when you are undergoing medical treatment or out of the country. It refers to a legal document that allows an individual or a financial institution such as a bank to manage your finances whether you are capable or not of doing it on your own.

The following are the essential considerations that you need to think about when creating a financial power-of-attorney document:

1. The need for a POA
Do you think you need help with handling your financial affairs? There are certain situations in which powers of attorney are not needed. For instance, if you own a big estate, you may be better off preparing a revocable living trust that offers great tax benefits and fits your needs. You may want to consider having both a financial POA and a revocable living trust.

2. The person who will act as your attorney-in-fact or agent
Take time in choosing the right agent who you will trust to carry out your financial tasks with your best interest in mind. Here are some of the characteristics that you should consider when selecting your financial agent:

• Financial savvy

• Trustworthy and comfortable to work with

• Can devote enough time to perform the required financial responsibilities

• Accessible and lives near your residence so that you can easily discuss with him or her any pertinent concern about your POA

• Can commit to carry out his or her duties as an agent if you are unable to handle your finances for a long time
Once you have chosen an agent, don’t forget to discuss the tasks, including the financial duties involved.

3. The forms you will use for preparing the power-of-attorney document
Use the power-of-attorney forms available online as your model or starting point. Before you consult with a lawyer, it is best to view several POA forms and understand fully the terms specified on them. That way, you can see the various possibilities before you head over to a lawyer’s office.
There are many sources of POA forms online these days. You can download a form from the Internal Revenue Service (IRS). You may opt to look for a particular POA form for your state on some websites that specialize in legal documents.
If you are about to finalize your POA document, you have to consult a lawyer first. You can ask the lawyer about the form of authority that suits your needs best as a principal.

4. The parties that will receive the power-of-attorney documents
Your power of attorney must be put in writing, signed by all parties involved (including the witnesses), and duly notarized. If the terms in the POA are related to taxes, it must be filed at the state government. If the terms are related to your real estate, your POA document must be filed at the office of the local county recorder.

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Power of Attorney: Should You Get One?

While it is much easier to put off getting a power of attorney than to create one, you should not take any chances. Before it is too late, you have to designate a trusted person to act and make decisions on your behalf. Should you wait until you become mentally or physically disabled and regret later for not doing it earlier? If you want to protect your assets and secure your financial future, then preparing a POA is one of the best decisions that you will ever make in your life.

A lot of people have wrong notions about powers of attorney. They think that only the elderly as well as those with massive assets are only the ones who must draft power-of-attorney forms. However, the need for POA is not limited only to these groups. Even younger people and those who have only a few assets may create powers of attorney. A POA suits people who want to have the peace of mind knowing that someone they trust will act on their behalf regarding financial or health care matters when they are no longer able to do so.

It is impossible to underestimate the importance of POA. This legal document comes in handy when you incur an injury or develop a life-threatening disease, both of which render you incapable of making decisions on your own. In case you become physically or mentally incapacitated, how could you possibly pay your bills and mortgages or conduct transactions at the bank? Imagine your home getting foreclosed because you are physically unable to pay off your home loan while you were undergoing medical treatment in a hospital. If you do not have an attorney-in-fact, you might get into trouble with the law.

You don’t want that to happen, right? So it is a wise move to have someone take care of your properties while you are away.

What will happen if you don’t have an attorney-in-fact and you are incapable of acting or deciding for your affairs? The court will then use its discretion in deciding who will be in charge of making decisions regarding your finances, properties, or health care. A judge will choose a person who will serve as your legal representative, and this agent may be someone who you do not fully trust. If you want to have a say on who will take care of your affairs when you become incapable of doing so, then it makes perfect sense to create a power-of-attorney document.

When is the best time to get a power of attorney? The answer is simple: now. It is because a POA is designed to protect yourself and your assets when the unexpected happens such as a debilitating illness or a serious injury. Thus, you will never know when a POA becomes necessary. Having said that, it pays to create it as soon as you can so that you avoid the conflicts or hassles that might arise should crucial decision-making has to be made and you are unable to do it. 

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Choosing an Agent for your Power of Attorney

By now you should know that when you get a power of attorney to authorize somebody else to execute your decisions in case you fail to do so, you need to find the right person to whom the authority would be bestowed. As a principal, you need to find your agent or attorney-in-fact. He or she does not need to be a lawyer. The agent could be just about anyone. However, you need to be very careful when choosing an agent for your power of attorney.

The agent you would designate for your power of attorney would assume specific responsibilities and duties. Most importantly, the person should always act for your best interest. By this, it means that the agent you are appointing should always intend to follow your instructions. He or she should be ‘fiduciary.’ Thus, that person must always act with the highest possible degree of good faith on your behalf.

Your agent still has the freedom to do whatever he/she likes to do even if he/she is supposed to always make decisions for you. The law mandates the person to use your money and assets only to uphold your benefit. But he/she could freely make several inappropriate acts with regards to your money. That is why it very important to choose and appoint a person whom you fully trust. You should not appoint just about anyone. Before you choose an agent of an attorney-in-fact for your special power of attorney, it would be best to ask yourself the following questions first.

Do you trust the person?

The best thing you should establish is trust on the person you are appointing as an agent. Unfortunately, trust is something earned over time. You have to make sure the person you choose is trustworthy.

Does the person truly understand your feelings?

He/She should know you well so as to understand your own points of view and opinions. If you think that person really understands your feelings, you could be sure he/she would follow and stick to your personal wishes if ever you get incapacitated.

Would the person be willing to spend time to handle your affairs?

We are all busy. Perhaps, the person you are appointing as your attorney-in-fact could be busier than you are. It is important that the person be able to spend much time to handle your affairs and work on your behalf. If not, you would be in trouble.

Is the person easily available?

Appoint an agent or attorney-in-fact who is easily accessible or available. This is to make sure he/she would always be there in cases of emergency. The person need not be personally present to attend to your errands all the time but at least he/she should be easily contacted through the phone.

Does the person know about handling finances?

You are entrusting your money and assets to the person. It is important that you appoint an agent who is well skilled and knowledgeable in handling and managing finances. If he/she is not, at least he/she should be willing to seek appropriate help from the experts. Your power of attorney would give the person the authority to handle your financial affairs. Make sure you are entrusting it to a prudent and wise person. 

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How an Agent in Your Power of Attorney should Manage Your Money

The power of attorney is most welcomed by many people because of its function to appoint a person to make decisions on your behalf. In case you get sick or you go out of the country and there would be important errands or transactions to be done, you could be sure someone would appropriately takeover to make sure everything is in place. If you are considering getting a power of attorney, you should make sure you are appointing the right agent or attorney-in-fact (the person who would be given authority to make or execute decisions for you).

One usual issue about power of attorney and appointment of agents is the way the person manages or handles finances. In the power of attorney, especially for the ‘durable’ one, that same agent is given the full authority to manage and handle all your money and assets in case you get mentally incapacitated. That is why many people choose to appoint their spouses or relatives as agents. But there are still issues and conflicts arising in such situations.

How could you make sure your agent would be using the authority well? First, you should appoint a person who you have already proven to be trustworthy and reliable. He/She should be highly ethical so as not to defraud you or steal money from you. Second, that person should have the ability to prudently and effectively manage finances. If not, he/she should be humble and wise enough to seek assistance from experts and professionals to make sure your finances are well managed and handled.

To be able to handle and manage your finances better, your agent must always decide to keep his/her own money separate from yours. Thus, there would be no confusion. The agent must not be personally involved in any transaction where he or she is representing your interests. For example, he/she must not be a stock investor who would gain more from buying your shares in a company in an inappropriate manner or pricing. The agent should be firm in keeping accurate all records pertaining to all transactions he/she gets into on your behalf.

You could have the option not to include specifications or instructions that would give your agent the permission to transfer to himself/herself any of your property or bank account. The law usually allows the agent to transfer your assets to your spouse (if your agent is not your spouse). However, the law does not allow him/her to transfer any of your properties to any other individuals, even your children.

Always seek the assistance and guidance of your private attorney when making or drafting the content and provisions of your power of attorney. It is more recommended that you do so especially if the document would involve your properties, savings, and income. You could still safeguard your assets even if you get into a power of attorney. That is if you could be more wise and prudent in making decisions. 

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Medical Issues And Power Of Attorney

Anything can happen and as much as we want to plan our day, we cannot really foresee the future. So what happens when we suddenly figure in an accident? Who will be at hand to take care of our business dealings and other personal issues? Can power of attorney fix things?

The lack of an appointed person to take care of the legal matters when one is dying often becomes a problem because no one anticipates this happening. And who can blame them? Nobody would want to go morbid and prepare for something like dying from an illness. Death is easier because the will (as in the last will and testament) will take care of the legal matters post-mortem but dying is another thing altogether. This is especially true with people who are gravely injured and cannot make decisions for themselves like for instance when they are under comatose or when they cannot speak, move or are invalid.

Power of attorney is one of the ways that you can appoint a representative for you should something happen to you. Although power of attorneys are often given for a specific period of time, some principals, or those who are giving the power of attorney, can extend the contract until something happens to them like when they become terminally ill or when they become gravely injured. This however should be plainly stated on the contract for the power of attorney. Otherwise, it will be deemed invalid by the court.

The principal can also choose to appoint an agent or the attorney in fact (the person to whom the power of attorney is given to) to be his or her representative when they become ill. Some, in fact, appoint people to act on their stead while they are in the hospital and to make any medical decisions in their stead like when they need to pull the plug in case of a comatose. This is what is often called the “Health Care Power of Attorney,” which empowers the attorney in fact to make health care decisions for the principal or the grantor, even something as sensitive as terminating the hospital care in cases when machines are the only one keeping them alive.

It includes the power to give consent or to refuse a medical procedure for the grantor. In some states like in New York, this is a requirement. A separate document is needed as stated by the Health Care Proxy Law by the State of New York, appointing your health care agent so to speak. Medical hospitals will not honor the provisions stated in the living will. It can state the medical wishes of the person but it does not appoint anyone from making the decisions for them.

For people with mental illness, they can prepare the Psychiatric Advance Directives or PADs, which grants the proxy to dictate psychiatric care for the patient as they cannot make the decisions for themselves with regards to their wellbeing. 

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Preparing for Your Future? Consider a Health Care or Medical Power of Attorney

If you have already reached the prime of your life, it is a wise move to create a power of attorney that designates a trusted person who will make choices regarding your health care and finances on your behalf when you are no longer mentally capable of doing so. That person, which is also called the attorney-in-fact or agent, can be a relative or a friend and doesn’t necessarily have to be a lawyer. You can grant a medical, health care, or both types of powers of attorney to secure your future as well as your health and assets.

Medical powers of attorney particularly involve medical care decisions that agents make for their principals. You still need one even if you already have drafted a living will. Medical powers of attorney and living wills are two different legal documents. The former merely authorizes a person to make important medical care decisions such as those regarding use of life support when the principal is mentally incapable of doing this for himself or herself. On the other hand, a living will indicates what a person wants to happen regarding his or her medical care when time comes life support is necessary.

Medical powers of attorney are not only beneficial for elderly people who are suffering from serious diseases. Younger people who have had an accident or are suffering from a health problem that renders them unconscious can also use these powers of attorney. In any case, you can choose a person who you trust the most to decide on your behalf according to the available information at that time.

That person who you assign as your agent must perform whatever you require even if it runs contrary to his or her own wishes for you. If you want something to happen in a specific situation in the future, your agent must follow your orders even if it is against their will to keep you alive despite your health condition.

Choosing an agent who will make medical care decisions for you is not enough. You also need to discuss with your agent your wishes in specific instances such as the kind of medications you want and don’t want to take when you are unconscious. In doing so, you can rest assured that everything goes smoothly as you planned when you are mentally incapacitated.

Another power that you can grant to a trusted person concerns your health care. Health care powers of attorney refer to legal documents that designate someone to make financial decisions for your estate should you become disabled, in which case you cannot make decisions on your own.

Once you become mentally disabled, your agent gains responsibility of handling all your finances. An agent or attorney-in-fact who handles your health care differs from a successor in a living trust. The agent is allowed to manage your finances while you are still alive, while a successor gains control of your assets only after your death.

Illnesses can happen to anyone at anytime, so it is important to have a medical or a health care power of attorney while it is still early rather than to let your family members become confused about making decisions regarding your medical and health care.

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Power of Attorney: What to Consider in Choosing an Attorney-in-Fact

Are you having difficulty choosing your attorney-in-fact? Of course, the choices may seem obvious to you: your spouse, child, brother, sister, or friend. But deciding whom you will entrust your assets, money, and health (even your life) can be very tough. To make the selection process a bit easier for you, take heed of the following considerations that you must include when nominating a person in your power of attorney.

• Age – It is a basic factor in determining whether someone is fit to become your attorney-in-fact. You must choose a person who is a lot younger than you are since he or she can carry out the responsibilities for a longer time compared to the older ones. Also, younger people are relatively healthier than their older counterparts, so you can be sure that they can handle your assets without much hassle.

• The person who can do the duties – Typically, elderly people appoint their eldest child as their agent. But how can you be so sure that your child will be able to perform all the responsibilities? If you have more than one child, it would be wise to divide the POA among the children who can handle the duties you require. Also, it helps to assess your children to determine which ones can decide according to your best interest or your wishes. That means going for someone who will manage your finances and personal matters just as you would have.

• Trust – Your level of trust matters a lot when deciding whom you will authorize to make important decisions on your behalf. Ideally, this person should be someone whom you trust your life with.

• Comfort – The person you will choose to be your agent must be someone who you are comfortable dealing with. On the process of drafting the power-of-attorney document, you will have to discuss all the terms in it, and it is important that the agent won’t be too much of a headache for you.

• Amount of control – How much authority are you willing to grant to your agent in terms of decision-making and performing your tasks on your behalf? That is a crucial decision you need to address when selecting the right attorney-in-fact. You may opt for several limited powers of attorney if you are not comfortable with the idea of giving your agent full control over your assets and personal matters. Limited powers of attorney assign particular tasks to an attorney-in-fact. You may even opt to set a specific period for the authorization to take effect.

• Legal requirements – A person must meet certain requirements according to the laws in your state. One of the requirements in most states is that an agent should be of sound mind to be able to make the right decisions when it comes to the finances, properties, or health of his or her principal.

Creating a power of attorney gives you an assurance that nothing will go wrong with your assets and finances and that your wishes will be carried out just as you planned. Part of that peace of mind comes from choosing the best person who will serve as your attorney-in-fact.

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How Much Power of Attorney Should You Give to Your Attorney-in-Fact?

One of the most important considerations in creating a power of attorney is how much power you must grant your attorney-in-fact or agent to protect your properties, finances, and interests from abuse. Since the courts do not regulate powers of attorney, the powers may be misused by an attorney-in-fact. As a principal, you do not want this to happen, which is why you must choose carefully the powers you are going to give to your agent.

You have to decide one or more of the following tasks that your attorney-in-fact will carry out on your behalf from time to time:

• manage your properties
• preparing and filing income tax returns
• making decisions regarding health care
• do transactions at the bank and pay your bills
• handle your retirement and insurance benefits
• collect your social security benefits
• handle your legal claims

You have two options when deciding how much authority you are going to allow to your agent. You can give either a general or a limited power. The right choice depends on your needs and preferences when it comes to managing your affairs.
General powers of attorney provide more authority to an attorney-in-fact than the limited type. Because the control granted to an agent is limitless, the general type has a wider scope than the other one. This means that the agent enjoys the same amount of privileges and access to the assets of the principal. For example, the agent can have access to the safety deposit box of the principal and transfer sales or investments, among other powers.

Entrusting all your assets and personal affairs as a principal is like entrusting your life to your attorney-in-fact. Your agent’s decisions regarding your estate will have a direct impact on you, considering the broad freedom granted by general powers of attorney. The agent will decide, for example, where your money and investments will go as well as the kind of nursing home where you will stay.

Simply put, your attorney-in-fact will be in charge of everything that concerns your life as soon as you become mentally incapacitated. That being said, you must make sure that you appoint someone who is worthy of your trust. Your agent can be your relative or trusted friend who can handle well all concerns regarding your finances and other affairs.

However, if you are not confident about entrusting everything to someone else, you may consider giving a number of limited powers of attorney rather just one general power.

As the term implies, limited powers of attorney grant limited and specific control of an attorney-in-fact over the estate of the principal. With such type of power of attorney, a principal can prepare for certain situations without giving full authority to his or her agent. There are various types of limited powers of attorney. Your choice depends on what aspects of your life need important decisions from someone when you are not able to make decisions for yourself.

Some of the limited powers of attorney involve health care, real estate, medical, and financial.

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Frequently Asked Questions about Power of Attorney

If you are considering getting a power of attorney, you should fully understand what it is all about. In general, it is a legal requirement that you be in a competent and normal state of mind when getting a power or attorney or appointing a person to be your attorney-in-fact. However, it could be very hard to prove that you are not well when you do so. It would be safe to get that document even if you are in the pink of health or even if you do not foresee any event that would make you unable to handle your affairs.

There are several frequently asked questions about this subject. It would be wise to be more familiar about power of attorney to fully understand how it could be of best use for you.

Do I need to appoint a lawyer as an agent?

The agent is also usually called the attorney-in-fact. You could appoint a lawyer as your agent. However, it is not a requirement. In fact, you could appoint just about anyone (in legal age) as your attorney-in-fact. The appointment and authorization should be clearly stated in the legal document (a power of attorney is actually a legally effective document).

How is the power of attorney created?

You need to completely fill out a specific power of attorney form. It should state yourself as the principal and identify the agent you are appointing to take authority on your affairs if you become unable to do so. Of course, it is a requirement that your appointed agent agree to take the authority you are giving. The document should be duly witnessed by a lawyer or a notary public. For the durable power of attorney, you should seek guidance from your private lawyer when doing the provisions or content of the document.

Is it possible to make a power of attorney if I get mentally incapacitated?

It is not in any way possible to do so. As mentioned, there is a requirement by law for you to fully understand what you are getting into for the document to take full effect. It is advisable that you make a power of attorney even if you do not feel any illness or you do not expect any event that would incapacitate your mental state. It is always ideal to be prepared.

Could the power of attorney be revoked?

Of course, it could be revoked especially if you are no longer comfortable about the kind of service or performance your agent is giving you. Be reminded that it is your right to revoke any authority you provide a person through a power of attorney anytime. You should accomplish a revocation form and distribute copies to all institutions and agencies that could be concerned with transactions, including hospitals and banks. Your agent should also formally receive a copy of that revocation.

As for the durable power of attorney, you could do two actions. First, you could get into a new durable power of attorney to name a new person as your attorney-in-fact or agent. Second, you could decide to handle all your own affairs.

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Power of Attorney: A Brief Overview

The power of attorney may seem like a legal jargon that only those who are well-versed in the technicalities of the law could understand. That is usually the case if you have encountered this term for the first time. However, nothing is complex or incomprehensible about it.

The term refers to a legal document that allows you to appoint someone who can make important choices for yourself when time comes you can no longer do it for your own. The person you appoint may be a family member, a relative, or a friend whom you are confident enough to make the best choices for you, especially when it comes to decisions regarding your health and finances. If you designate someone whom you trust as your agent, you can have peace of mind that the person can make decisions for you according to your best interest. The agent is also called the attorney-in-fact. Do not be misled by the term, though, because an attorney-in-fact does not have to be a lawyer. Your document also has to be tailored to your particular needs and wishes so that you have nothing to worry about in the future.

To put it simply, this legal term is a medium for granting an individual the right to make medical, financial, and other decisions on your behalf. Easy to understand, isn’t it?

The authority to manage another person’s affairs may begin immediately or only when the principal can no longer make decisions on his or her own. The latter scenario happens when the principal is out of the country for a while or when he or she becomes mentally incapacitated.

Granting someone a legal authority to decide on your behalf does not necessarily mean you cannot make decisions for your own anymore. It only means that at the same time, another person can also make choices for you—so you are sharing the right to decide with your agent. For example, if you are on a business trip abroad, you can designate someone to pay your bills or do bank transactions on your behalf. Your agent will only follow your orders, so long as you are mentally capable of making decisions for yourself. The agent also takes charge of keeping and organizing records of all transactions he or she made on your behalf.

As the principal, you have the power to decide the amount of authority you will grant to your agent. You can appoint him or her to manage most of your financial and personal affairs or to handle only a specific aspect of your life.

The laws regarding power of attorney vary from one state to another. However, a number of guidelines are common among states, and these rules must be strictly observed by both the principal and the agent. For example, two legal requirements must be met. First, the agent must not be mentally disabled and is not easily influenced by others. Second, at least two witnesses must sign the documents. Thus, you must discuss all the applicable state laws first with a lawyer before you and your agent sign any document.

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Power Of Attorney And Its Validity

Power of attorney can be a tricky thing to do because you are basically giving another person full right to act in your stead in personal and legal matters. This means that the person who you have given the power of attorney to, which is called the “agent” or the “attorney in fact,” will have the right to sign legal documents in your name and even have access to your bank accounts, among other things. Thus, it is important to look into the validity of these powers of attorney and the circumstances when they can become invalid. So if you are thinking of giving a power of attorney, read on.

Because of the sensitive nature of this, power of attorneys are often only given to people that the “principal” ( the person giving the power of attorney to the agent) absolutely trusts. This can be a son or daughter, a parent or other close relations.

Do not be fooled with the name. Anybody can be given the power of attorney, even people who are not lawyers, although most of those who are given such responsibilities are family lawyers of rich people or corporate lawyers of big corporations, whose job entails them to represent the CEOs or the big bosses, which are often required to be in three places at the same time, which is of course, not humanly possible.

Power of attorney often has a scope, depending on the agreement or the dictates of the principal. In most cases, the power of attorney will only have an effect on specific cases or issues. Some will be stating a specific period of time while others will be point to more specific business dealings. For instance, a power of attorney may be granted to sign a business deal with Conglomerate X but will not be effective when signing deals with Conglomerate Y even if they are signed on the same day.

It all depends on the legal papers that accompany the power of attorney. And these papers stating the contract for the power of attorney is required to be shown before an agent can act. Some countries accept oral agreement but others like the United States rely on written documents to deem it legal. Because of the birth of the internet and the computers, powers of attorney sent over the internet or those that are electronically given are accepted in some states and also in some countries.

Remember though that regardless of the period stated on the contract, the power of attorney will be void once the principal dies. When they fall ill, become physically or mentally incapacitated, some power of attorney agreements are honored provided that they have the provision that the contract will still be valid when these things happen. Otherwise, they will also become void.

It is also assumed that the agent will be completely honest and truthful with his business dealings in representing the principal. When he is proven to be dishonest and fraudulent, all the things that he has signed when the power of attorney is still in effect will be deemed invalid. 

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Four Main Types of Power of Attorney

If you want to authorize anyone or any organization to properly handle your affairs while you are unable to do so or while you are unavailable, you should get a power of attorney. It is a document that summarizes and proves your agreement to give your appointed person (the agent or attorney-in-fact) the authority to act on your behalf.

There are four main types of power of attorney that you could choose from. These types may be functional and useful depending on your need and requirements. They are: general, special, healthcare, and durable power of attorney.

A general power of attorney is a document that gives your agent a broad authority in handling your affairs. This authority usually includes handling of your banking transactions, purchasing and disposing properties, settling claims, exercising stock rights, entering into deals or contracts, filing tax returns, and buying life insurance. It is usually used to enable your appointed agent the power to handle your important transactions within a specified period when you are practically unable to do them personally.

The special power of attorney provides your agent specific powers. You would decide on those specifics. Unlike the general power of attorney, the special power attorney does not give the agent a broad range of coverage. It only specifies how he/she should act. The document should specify which activities the agent should do. Transactions that are not included in the provisions could not in any way be managed or handled by the person.

The healthcare power of attorney designates the agent as a person who should make proper healthcare decisions for you if you get mentally incompetent or unconscious. If you would not be able to make logical decisions due to health reasons, the agent would be authorized to do so in your behalf. However, take note that the healthcare power of attorney is not the same as a living will, which is a document to express your personal wishes in case you would need life-sustaining procedures.

The durable power of attorney could be a general, healthcare or special power of attorney containing specific durability provisions. In case you suddenly get mentally incapacitated while any of the three kinds of power of attorney is in effect, the durability provision of the document would allow the agent to stay as your attorney-in-fact indefinitely. In the durable power of attorney, you are acknowledging the possibility that you could become mentally or totally incompetent because of any accident or illness. For this power of attorney to take effect there has to be a genuine certification from a doctor to prove the incompetence.

In every power of attorney you would get into, it is always important to make sure you are choosing and agent or an attorney-in-fact who is very trustworthy and reliable. He/She should be able to uphold only your best interest when doing transactions and making decisions on your behalf. You may fully entrust into him/her the authority and power to handle and manage your money or assets. 

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What Is The Durable Power Of Attorney For?

The power of attorney is a legal document that authorizes a person or organization to act on financial and business matters affairs of a person referred to as the principal. The person or organization that receives authority is called the agent or the attorney-in-fact.

The durable power of attorney is called such, since the attorney-in-fact would continue to have authority and act on behalf of the principal, even if the principal becomes incapacitated. Though the durable power of attorney has such characteristic, it is still important for the document to state that it would remain valid even if the principal becomes incapacitated or disabled.

The durable power of attorney can be useful in situations when the principal is seriously ill, disabled, and if their property is modest but do not need setting up fund trusts or guardianship. This is also favourable for married couples whose account is joined.

The durable power of attorney is also referred to as the health care power of attorney. In many situations, the health care power of attorney is different from the agent who would oversee financial and business matters. The attorney-in-fact who is given the durable power of attorney is required to make decisions related to the principal’s health like stopping life support or performing surgery.

Laws on how the power of attorney should be created are different on each state. For example, in South Carolina, the preparation for the power of attorney is the same as preparing for a will. In California, notarization in the documents is important but this may not be the case in some states. This is why it is important to have knowledge on legal matters and employ legal assistance when making the document.

A possible problem with the durable power of attorney is that the principal may not want the attorney-in-fact to take specific liberties. The principal could specify in the document what specific decisions the durable power of attorney can make. Aside from that, the document could specify that the durable power of attorney could take effect in the event the principal becomes disabled.

The durable power of attorney could cover different decisions and responsibilities, aside from health care decisions, like:

• Providing gifts which can play a major part in estate tax planning.

• Accessing safe-deposit boxes.

• Signing tax returns, IRS documents, and settling tax disputes.

• Pursuing legal matters or litigation on behalf of the principal.

• Collecting benefits from health and other insurances on behalf of the principal.

• Setting up or amending trust funds.

• Revoking the power of attorney.

Laws covering the power of attorney vary in each state. For example, if the attorney-in-fact is the spouse and they get a divorce, the power of attorney is terminated. The court may also rule the document to be invalid, especially if the principal is proven to be incompetent when the document was signed. The principal could also revoke it, as long as he is mentally sound.

The power of attorney could also be terminated if the attorney-in-fact becomes incompetent, unavailable or dies. To avoid problems, the principal could identify an alternate attorney-in-fact and state it in the document. Make sure to identify the situations when the alternate would take responsibility. 

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The Pros And Cons Of The Power Of Attorney

Having somebody take care of your business dealings can be real nice. Just think about it. You don’t have to go to your business meeting in say Uganda to sign documents. You can just send a representative with the power of attorney and that person can sign the contract for you. But for all its benefits, the power of attorney can also be a bane when not done the right way and when put into the wrong hands.

What is a power of attorney?

Before we can discuss the advantages and disadvantages of using a power of attorney, you must first understand that exactly is the concept. Power of attorney is a document that gives people the authority to act on another person’s behalf for a specific period and matter depending on what is stated on the paper. This means that another person can sign documents for you and make decisions on your behalf. The person who gives the power of attorney is often called the principal while the grantee is called the proxy or sometimes the agent.

Use of the Power of Attorney

Power of attorney is used within corporations where executives have tightly packed schedules that require them to travel in three different countries in a span of three days. This can either be physically impossible or at best, physically tiring. Thus, the power of attorney serves to lift the burden from the executives, allowing them to become more productive. Company lawyers are often sent or subordinates who are trusted to make decisions and sign the contract.

Another advantage of a power of attorney is its importance in making healthcare decisions. A power of attorney can also be given to people, authorizing them to refuse or allow medical care to the principal if they become incapable of making decisions for themselves. This also includes making the decision to pull the plug in cases when only a machine is keeping the principal alive.

Some people are also given the power of attorney to take care of a principal’s financial portfolio. Although this is well and good especially when you are so busy and want to put the business of investing your money to a professional. But money can turn people dishonest. And here lies the one disadvantage of a power of attorney— putting your trust into one person.

On the downside

Remember that in giving a power of attorney to someone, you are basically telling people who read the document or the contract that you are giving the agent full rights to sign for you and agree or refuse something on your behalf. If the agent turns out to be corrupt, then any transactions that he or she handles is at risk for fraud. This is why although this is a very convenient thing to do; only a few ever use it. Giving that kind of power to one person can be very risky even if you plan to monitor all the transactions made under your name. 

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Essential Information about Durable Power of Attorney

A durable power of attorney is a practical option for an elderly who wants to plan how his or her properties, business, and other affairs will be managed when time comes he or she is mentally unable to do so. It is especially useful for people who are suffering from a debilitating health condition such as Alzheimer’s disease or are going to stay in a nursing home.

Right after you and your agent have signed the documents, the durable powers of attorney take effect until they are revoked by the principal. The document is terminated at the death of the principal. Durable powers of attorney are named that way because no additional corrections to the documents are necessary once the principal becomes mentally incapacitated. Thus, this type of powers of attorney is an enduring one since it remains in effect even if the principal is mentally incapable of making decisions for himself or herself.

Durable powers of attorney are classified into two general types: health care and financial. As the name suggests, health care durable powers of attorney authorize a person, who is called an agent or an attorney-in-fact, to make all the needed choices regarding health care and hospitalization on behalf of the principal. The decisions can be made by the agent once the principal is no longer able to do it for himself or herself. This type of durable powers of attorney takes effect when the principal has become mentally incapacitated or has a terminal disease. It grants the agent the right to decide on what to do with the principal’s remains after his or her death, as well as donate the organs for educational, scientific, or transplant purposes.

What if I have not appointed someone as an agent to oversee of my health care, you might ask. If nobody has powers of attorney to act on your behalf and you are already unconscious or mentally incapable, the courts will assign someone to make health care decisions for you.

The second type of durable powers of attorney is financial in nature. It is defined as the full legal authority given to another individual to be responsible for all your finance-related affairs, including filing income tax returns and paying the bills. The agent can even sign documents on behalf of the principal.

This agent is allowed to handle all the principal’s finances except the assets owned by the revocable living trust. Examples of assets outside the living trust include pension plans, annuities, and IRAs (individual retirement accounts). These assets are managed by the attorney-in-fact designated by the principal who owns the assets. As with a living trust, durable powers of attorney protect the privacy of the principal as well as prevent delays in financial transactions.

It pays to plan your estate before you become unable to manage things by yourself. On that note, it is important to have a durable power of attorney ready so that you can rest assured that someone you trust will manage all your finances, assets, and health care issues instead of a person appointed by the courts.

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Power of Attorney 101

We often hear the word “power of attorney” in TV shows and read them in books. The phrase seems to be a moot point already. After all, what other power do attorneys need than the legal ones, given to them when they became lawyers? What exactly is a power of attorney?

Power of attorney does not refer to a “power” intrinsic to the lawyer or attorney. It is actually given to a person even if he or she is not a lawyer. Still, many of those who are given the power of attorney are lawyers, often family lawyers who are trusted to deal with a wide range of things. When you are given the power of attorney, a person is authorizing you to act on their behalf in personal and business matters that have legal issues. They can sign your documents and decide for you while you are away or incapable of making decisions yourself.

Although the word attorney is a synonym to a lawyer, in United States, it is mostly used to refer to these people who are given the power of attorney. They are also called agents because they also serve as liaison officers and go-between or more formally, attorney-in-fact because they are only licensed by a common person.

Because it can have legal consequences, the transfer of power or the authorizing is written as a legal contract, which is shown to people before the “attorney-in-fact” can proceed with his dealings on behalf of the client or the principal. Often, when the attorney-in-fact is being paid, a separate contract is drafted for the payment and is not shown to other people. A principal must of course be of a good mental state when giving the power of attorney.

Principals who are physically injured, sick or mentally unhealthy are deemed incapable of giving power of attorneys. When power of attorneys are given under these circumstances, all the legal documents the “agent” signs or agrees to will not be honored in court and will be deemed ineffective. Also, the scope of the power of attorney will also become ineffective when the principal dies or becomes incapacitated, meaning if they suddenly suffer from an illness, physical or mental.

Although some countries accept an oral power of attorney, in the United States, the written contract is still important. Some states also accept the electronic power of attorney as long as the document is proven legitimate and legal. There are different kinds of power of attorney given to people. It may be general or special, which is limited to only one type of dealing or issue. It all depends on the principal. There is also the scope of the power of attorney. Often, it only takes effect within a certain period of time.

As mentioned before, it will not be valid when the principal dies or falls ill unless it is stated in the contract that the power of attorney will continue when illness occurs. This is called the durable power of attorney. When the principal dies, the power of attorney will automatically be ineffective.

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What Power of Attorney Is

Have you heard about ‘Power of Attorney’? Why do people have it? You may not know it now, but it could be what you need today. To begin with, the power of attorney is a legally effective document that states your agreement to give somebody else (a relative, a friend, or an employee) an authority to make special decisions or to do several things on your behalf. It is recognized in common law and civil law systems. It could be a legal or a business matter.

If you get a power of attorney for your own use, you could call yourself a ‘principal,’ a ‘granter,’ or a ‘donor’ (of power). The other person to whom you are intentionally providing powers or authority is called the ‘agent’ or the ‘attorney-in-fact.’ Take note that just because the term ‘attorney’ is used does not necessarily mean that you need to give an authority only to a lawyer. Your agent or attorney-in-fact could be of any profession, not necessarily a lawyer.

There are many things you should understand about power of attorney. First, execution of the power you bestowed does not mean you no longer have to make the decisions. Take note that the power of attorney just mandates your agent to act for you. For instance, if you are suddenly hospitalized even for a short period and you need to continue your important banking transactions, you need to get a power of attorney and appoint anyone you trust to do errands for you.

The agent should just follow your instructions or directions especially if you are still very much capable of making your own decisions. Thus, it is like you are just sharing your authority or power with another person. In the same way, you could instantly revoke the authority you gave your agent anytime you like especially if you think you are dissatisfied and are dubious about his or her performance of the duty you gave him/her.

There are instances when the power of attorney takes other functions. The authority usually provided by the legal services specifically for the elderly could be categorized as a durable power of attorney. It is somehow different from the usual and normal power of attorney used. ‘Durable’ simple means the agent is mandated to continue making decisions for the principal especially if the latter becomes incapacitated. However, the law states that the agent should be obliged to act only in the best interest of the principal. Thus, the money and properties involved must only be used for the benefit of the principal.

If you need to establish a durable power of attorney, take note that you are providing your agent the following authority: withdrawing your money from bank accounts and spending it; selling your property; and pursuing legal actions and insurance claims. If you are uncomfortable with the setup, you may decide not to get a durable power of attorney or any form of power of attorney at all. However, when you suddenly become mentally incapacitated, the court could appoint a conservator or guardian for you. 

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Watching It: Power Of Attorney And Problems

The power of attorney is a legal document which gives a person or an organization power to govern finances, business or even personal issues. The person entrusted with this power/ authority is called the agent or attorney-in-fact while the person who signed the document is the principal.

The power of attorney is usually used to handle financial or business affairs when the principal is not available or incapacitated. There are power of attorney documents which allow the agent to continue being authority even the principal is no longer mentally capable. However, in elderly cases, power of attorney could be abused.

Financial/material abuse is the second highest rate of elderly abuse with 42%, following psychological abuse (59%). Financial abuse would include misusing the power of attorney, using the adult’s money for other purposes, pressuring adults to sell their home or property, cashing out the adult’s pension or cheque, or pressuring the adults to buy alcohol or drugs.

Abuse of the power of attorney could be intended or a sign of negligence. For example, a niece who runs off with her aunt’s money when given the power of attorney is a sign of intended abuse. The principal may not be able to monitor how transactions are made and eventually caused the agent to misuse his or her finances.

When identifying the person who would represent the interest of the principal, it is important to determine a person who is trustworthy and would not betray the interest of the principal. In addition, if the principal feels that the power of attorney is being exploited, then it would be time to get legal support.

Aside from issues about the agent’s trustworthiness, another common problem with the power of attorney is that the authority is too broad. When the principal uses the general power of attorney, the agent would find himself handling real estate, securities and large financial transactions.

To avoid this problem, the power of attorney should be specific enough. Identify particular obligations or transactions that the agent or attorney-in-fact could handle. Also, to avoid problems with abuse in the document, the American Bar Association suggests that list any powers that the principal don’t want the agent to have, like altering the principal’s will or giving away the principal’s property.

It may prove to be difficult for the agent to handle everything. In some cases, a co-agent is assigned by the principal to ensure that not all responsibilities would burden one agent. To exercise more control on the transactions, the principal is also recommended to ask regular reports from the attorney-in-fact/ agent.

Being aware of such issues about the power of attorney could help principals and those who are thinking of getting such document, be cautious. Although, there are forms on the internet that would allow you to create the power of attorney quicker, it is always advised that such document be made in with legal assistance. After all, the agent would be given authority over the things that we have worked for for most of our lives. 

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Seven Steps in Preparing a Power of Attorney

Are you going to create a power of attorney (POA) yet you don’t know how to start? Various situations call for authorizing another person to take care of your finances, real estate, health care, or other affairs as well as make legal decisions on your behalf. Preparing power-of-attorney documents is not as complex as it seems. Listed here are seven easy steps to help you come up with a proper power-of-attorney document.

1. Gather all the forms you will use as models for your document. Over the Internet, you can find websites that specialize in legal forms. These sites may allow you to download their power-of-attorney forms.

2. Decide which type of POA you need. Your general options are the general and limited powers of attorney. The first type grants an attorney-in-fact an unlimited control over your finances or health care without a predetermined period. In contrast, the second type is limited to only a certain kind of financial responsibility.

3. Be wary of the risks involved in granting another person the power to manage your finances. Remember, by creating a POA, you authorize your agent to use your name in carrying out his or her tasks such as preparing and filing tax returns, borrowing money from the bank, and collecting your social security benefits. With a POA in his or her hands, your agent can make financial, health care, and other legal decisions on your behalf. That being said, you must educate yourself about the risks as well as the responsibilities involved with a POA before you start the paperwork.

4. Start writing the document. List all the reasons and the scope for granting POA to your agent. You will need these details when you consult with a lawyer who will decide the right type of POA to use in your case.

5. Include all your assets and liabilities in your document. Make sure that your power-of-attorney form properly documents all the necessary information that can guide your agent in making the right legal decisions for you.

6. Talk to a lawyer. It is recommended that you consult a lawyer to avoid conflicts or hassles in the future. The lawyer can draft the legal document and inform all the parties involved about the rights and duties stipulated in it. Once the draft is done, the lawyer will keep a copy of the document that will come in handy should legal disputes arise in the future.

7. Sign the document. All the parties, including at least two independent witnesses, must properly sign the form. The form should also be notarized before it can take effect.

The power of attorney is an indispensable legal document that gives you a peace of mind that all your assets are taken care of when you become mentally incapable of making decisions for yourself. You can also prepare one for your elderly family member or relative who has a serious disease or medical disability. In such case, you have to make clear of the person’s needs and goals and specify them properly in the document.

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Choosing The Best Agent For Your Power Of Attorney

Ever wondered how your modest properties or finances would be managed, in case something happens to you or you would have to go somewhere? Then think about the power of attorney. The power of attorney is a legal document that would enable you to grant a person or organization control over your financial and business matters.

The person who is signing or creating the power of attorney is called the principal, while the person who would be awarded with authority is called the attorney-in-fact or the agent. Since the power of attorney would provide the agent the control over banking, credit and other financial issues, it is important to be made carefully which is why legal assistance is importance.

There are two kinds of power of attorney, the specific and the general. The specific power of attorney identifies particular transaction when the document would take effect. While, the general power of attorney could cover different personal and business transactions.

When choosing the person who would best represent the interest of the principal, it is important to consider several factors.

• Age. If you are considering your child to be the attorney-in-fact, then you would have to take note of the age. Laws on creating the power of attorney are different on each state. But almost all of the laws agree that no agent should be below 18 or 21 years old.

• Time. When choosing the best agent to represent you, then it may be important to consider the amount of time they can spend on managing financial and legal matters.

• Location. Choosing an agent who does not have to be far from the principal and the property is a better choice.

• Capability. It is important to consider an agent that has the ability to manage the principal’s property and legal matters. The agent is showing problems with managing their own finances, then it may not be a good idea to trust your own finances to them.

• Work experience. It may be important to choose an agent or an attorney-in-fact that has experience or level of expertise in finances or in legal matters.

• Organization and documentation skills. The principal may need the attorney-in-fact to track and properly document the different transactions made whether it is for personal, business or government purposes.

Another thing to consider is determining the spouse as the attorney-in-fact. Most military personnel would provide the power of attorney to their spouses especially if they are away in combat. A close relative could be work as an alternate.

It does not always have to be relative or a family member, some would get a non-relative attorney-in-fact. If the principal is also a bit uncomfortable on assigning a lot of responsibilities on one agent, then h/she could get other co-agents. It could be done as long as the information or the limitation of the capabilities is specified in the power of attorney. Before specifying the name of the agent in the power of attorney, the principal should talk to the agents first and ask them if they are willing to be agents.

There are no organizations, departments or governing agency that would monitor the agent, it would rely on the principal and the principal’s relatives to monitor if the agent is carrying what is stipulated in the power of attorney. 

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