A power of attorney is an essential tool in planning for the possibility of becoming incapacitated and needing someone to manage your affairs on your behalf. These legal documents can grant broad authority to one or more power of attorney agents to transact business or make medical decisions based on your behalf.
The Different Forms of a Power of Attorney
A “power of attorney” can come in many different forms depending on your needs and goals. First, a power of attorney may be a “general” or “limited”. The word “limited” narrows a power of attorney’s authority to transact business only to specific matters, property or with an agent’s limited access to funds.
Regardless of whether the power of attorney is general or limited, it may also be “durable” or “non-durable”. A “durable power of attorney” remains in effect until the person revokes the document or upon his or her death while a “non-durable power of attorney” would revoke upon the principal’s incapacity.
Finally, a power of attorney may be effective immediately upon signing. Alternatively, it may be “springing,” which means that it would only be effective once you are deemed legally incapacitated.
A “medical power of attorney” is a springing, limited, durable power of attorney and permits healthcare decisions on your behalf. The document may also include sections similar to a living will, guiding the agent and doctors’ medical decisions based on your wishes.
Like your will, power of attorney documents require drafting according to the laws of the state in which you live and some forethought of your selection of agents. Every state has laws governing the creation and use of valid power of attorney documents. While each state should honor a valid power of attorney from another state, residents of multiple states and snowbirds who routinely travel and transact business in other states may benefit from having an attorney in each state review the power of attorney to ensure local institutions will not give the agent a hard time when they rely on the power of attorney. Take note that if your spouse is your power of attorney, this designation does not automatically end when you finalize a divorce.
The Role of the Financial Power of Attorney
A financial power of attorney can have the authority to perform some or all of tasks below and must always act in your best interest, keeping accurate records and avoiding conflicts of interest.:
- Pay everyday expenses for you and your family with your assets;
- Maintain, pay taxes on, sell, buy, and mortgage real estate and other property;
- Collect government benefits including Medicare, Social Security, Disability, and more;
- Invest your money in mutual funds, stocks, and bonds;
- Transact with banks and other financial institutions;
- Buy and sell annuities and insurance policies on your behalf;
- File and pay your taxes;
- Operate your small business;
- Claim inheritance or other property to which you are entitled;
- Transfer property to a trust you created;
- Hire someone to represent you in court; and
- Manage your retirement accounts
The Role of a Medical Power of Attorney
The medical power of attorney is authorized to make medical decisions on your behalf when you cannot make those decisions for yourself. The agent you select must be trustworthy and mature in overseeing your medical care and healthcare decision-making. Your healthcare agent will coordinate with doctors and other healthcare providers, ensuring you receive the medical care you prefer.
To make these preferences clear, you may choose to use the second type of healthcare directive known as a “living will” or “healthcare directive.” In this document, you can make clear your healthcare preferences. In some states, including New Jersey, medical power of attorney and healthcare directive may combine into one form known as an “advance health care directive.” With this information, your agent is legally bound to comply with your treatment preferences to ensure they are made aware in the documentation.
Considerations When Appointing a Power of Attorney
When appointing a power of attorney, the agent you select is a personal decision. There are things to consider such as if your adult children are trustworthy and mature in handling finances and medical decisions on your behalf. Some adult children move away or lose touch and are not necessarily suitable candidates simply because they are your children. You may select a contemporary friend who becomes disabled themselves or predeceases you, so you must have a backup agent in the documentation. Always make the decisions regarding your power of attorney selection while you are in good mental and physical health.
Choosing your agent well, appointing backup agents and tailoring your documents to your needs and specifications can take away a lot of worry about your future care and well-being. Having valid power of attorney documents avoids guardianship issues, which are time-consuming, expensive and limit freedoms.
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