There are different types of powers of attorney.
You never know if illness or accident will incapacitate you.
This simple fact has never felt more personal than it does during a global pandemic.
Preparing for incapacity requires power of attorney planning.
According to a recent FedWeek article titled “The Options in Granting Powers of Attorney,” proper planning involves using the right type of power of attorney.
Although all powers of attorney designate an agent to manage your financial affairs if you cannot, they do so in differing degrees and under varying circumstances.
Limited power of attorney.
This scope of this power of attorney is accurately reflected by its name.
A limited power of attorney only gives authority to an agent for a specific circumstance or an allotted period of time.
What types of situations might call for a limited power of attorney?
This option would work well if you could not attend the sale closing of your home or selling your automobile.
General power of attorney.
In contrast to the limited power of attorney, the general power of attorney is broad in its scope.
The agent can at any time handle all of your finance matters, to include paying bills, taking IRA distributions, or signing contracts on your behalf.
Springing power of attorney.
A springing power of attorney becomes effective only in certain circumstances.
Often this that you be declared incapacitated.
The document itself can provide the definition of incapacity and how it is to be assessed.
For example, you could require letters to be written by two physicians to confirm you cannot manage your own affairs.
Durable power of attorney.
While it is essential to have the right powers of attorney in place, you want to make sure it remains in force should you become incapacitated.
Consequently, you will want to create a durable power of attorney so it will continue to be effective after you become incapacitated.
What happens if you do not have a power of attorney?
Your family will need to petition the probate court for someone to be judicially appointed to manage your financial affairs.
This process can be long, expensive, and subject your personal financial affairs to the public record.
In the end, the only way you can ensure the agent with be an individual you trust is to appoint that person via a power of attorney.
In addition to a financial power of attorney, you will want set up an advance health care directive.
In our practice, that legal document has two components: a health care treatment directive to address end of life matter and a durable power of attorney for health care decisions.
The individuals your designate in your advance health care directive will responsible for making making your healthcare dedications, to include “ultimate” decisions.
Interestingly, your financial and your health care powers of attorney need not appoint the same individual.
In fact, many people choose to divide these duties.
Often a family member who is good with finances is put in charge of the purse and a family member with a medical background is put in charge of the person.
You know the strengths and weaknesses of your family members, so appoint them accordingly.
Take action now to set up your powers of attorney as part of a comprehensive estate plan.
Reference: FedWeek (Aug. 26, 2020) “The Options in Granting Powers of Attorney”