FedWeek’s recent article entitled “The Options in Granting Powers of Attorney” explains that a power of attorney designates someone else to handle your affairs, if you can’t.
Here are the major types:
- Limited power of attorney. This allows an agent to act on your behalf under specific circumstances like a home sale closing that you can’t attend and/or for a defined period of time.
- General power of attorney. Gives broad authority to your agent, who at any time can write checks to pay your bills, sign contracts on your behalf and take distributions from your IRA.
- Springing power of attorney. This isn’t effective when you execute it, but rather “springs” into effect upon certain circumstances, such as your becoming incompetent. You can say in the document what’s needed to verify your incompetency, like letters from two physicians stating that you no longer can manage your own affairs.
A power of attorney is important because your agent can act if you become incapacitated. To serve this purpose, a power should be “durable,” so it will remain in effect if you become incompetent. Other powers of attorney may not be recognized if a judge determines that you no longer can manage your affairs.
Without a power of attorney your family may have to ask a judge to name a guardian to act in your best interests. A guardianship proceeding can be expensive and contentious. You might also wind up with an unwelcome interloper managing your finances. To avoid this situation, designate a person you trust as agent on your durable power.
A health care power of attorney (“HCP”), also known as a health care proxy or a medical power of attorney, should be a component of a complete estate plan. This document names a trusted agent to make decisions about your medical treatment, if you become unable to do so. The person you name in your health care power doesn’t have to be the same person that you name as agent for a “regular” power of attorney (the POA that affects your finances).
For your health care power, chose a person in your family who is a medical professional or someone you trust to see that you get all necessary care.
Contact an experienced estate planning attorney to explain these types of powers or if you have estate planning questions.
Reference: FedWeek (Aug. 26, 2020) “The Options in Granting Powers of Attorney”