You may ask yourself, "Why do I need a Power of Attorney?"
Or you might ask, "What is a Power of Attorney?"
A power
of attorney (POA)
is a legal document that allows you to appoint a person or
organization to manage your affairs if you become unable to do so.
However, all POAs are not created equal. Each type gives
your attorney-in-fact
(the person who will be making decisions on your behalf) a different
level of control.
Special
Circumstances may trigger the need for a POA for any person over the
age of 18. For example, Military Personnel may create a POA before
they deploy overseas, leaving behind their families, so that someone
can act on their behalf should they become incapacitated. Incapacity
isn't the only reason you might need a POA. Younger people who travel
a great deal might set up a POA so that someone could handle their
affairs, especially if they have no spouse to do so in their absence.
However,
the most common time to establish a POA comes with advanced age,
usually in retirement.
Here's
how it works: You select someone you trust to handle your affairs in
case of an emergency. You could establish a POA that only happens
when you are no longer capable of handling your affairs yourself - or
one that goes into effect immediately so your agent can act for you
in your absence. Your spouse, by the way, does not automatically have
your power of attorney over property that is in your name only.
POAs
are not just reassuring, they may become the instruments that protect
your financial and realty interests, your health and even your manner
of dying. If you are incapacitated and have no POA designee to take
the wheel, your family will likely be forced into costly and
time-consuming delays.
People
have to set up a POA for themselves. A family can't "get" a
POA when they suddenly realize that Great Uncle Johann can't handle
his affairs. If Unlce Johann didn't have the foresight to set up a
POA himself, a court will have to appoint a guardian or conservator.
And when a court does this, neither Uncle Johann nor his family has
any control over who is appointed.
In
some states, the guardian is required to post a bond and file a
detained inventory and accounting of the person's relevant assets.
The entire affair is more complicated, more costly - and more public
- when a POA is not already in place.
POAs
differ depending on when you want the authority to start and end, how
much responsibility you want to give your agent, and laws and
requirements in the state where you live. There is no uniform POA
common to every state.
Do
not expect your Will to serve as a substitute. Wills designate the
distribution of your property after death. POAs support the
continuation of a critical financial and/or health-related decisions
that you would want or need to be made if you are unable to make them
yourself.
Signing
a POA does not deprive you of control over your personal affairs. It
is a contingency document that becomes a powerful instrument only
when it is needed. There are several types, as well as various
degrees of responsibility that you can delegate.
A
conventional
POA
starts when it is signed and continues in force until
you become mentally unable to make coherent decisions. It is
important to state exactly what authority you are giving your agent.
For example, you could give your attorney only the power to sign a
deed of sale for your house in your absence (this is called a
“”limited power of attorney” and also is commonly given to
money managers). Or you could specify a much broader range of powers,
such as access to your bank accounts (what's known as a “general
power of attorney”).
A
durable
POA
begins when it is signed but stays in effect for a lifetime
unless you initiate the cancellation. Words in the document should
specify that your agent's power should stay in effect even if you
become incapacitated. Durable POAs are popular because the principal
can manage affairs easily and inexpensively.
A
springing
POA
comes into play only when a specific event occurs – your
incapacitation, for instance. A springing power of attorney must be
very carefully crafted to avoid any problems in identifying precisely
when the triggering event has happened.
A
medical
POA, or durable power of attorney for healthcare decisions,
is both a durable and a springing POA. The springing aspect means
that the POA takes effect only if specific conditions take place. As
long as the principal is conscious and of sound mind and body, the
medical POA will not be triggered. Some medical POAs are written to
end when the principal recovers from the incapacitating condition.
You
can have a Living Will in addition to a healthcare POA. A Living Will
usually addresses specific issues and wishes related to medical
treatment if you have a terminal condition, or to dying (such as the
extent to which lifesaving measures should be used). A Living Will
may not deal with other important medical issues, however, such as
whether you would decline dialysis or a blood transfusion. These are
kinds of concerns that can be directly articulated in a durable power
of attorney for healthcare decisions.
The
risks of naming someone your agent or attorney-in-fact through a POA
are obvious. It must be someone you trust without hesitation.
Depending on how you worded your POA, the person you select will have
access to your bank account, securities, house and personal property.
Everything.
In
this respect, it is useful to contact each institution you do
business with to be certain that your POA authority will be honored.
Some banks and investment institutions have their own forms to
complete.
Anyone
can set up a power of attorney. One way to set up a Power of Attorney
is through my business, Kirchner Admin Services. This is one of the
services that I offer, as well as a Living Will and Testament. If you
use my services and set up a POA, I will execute it properly (it will
need to be notarized and you may need witnesses, in which I can act
as your witness or you can chose someone else as a witness.
To
set up a legally binding power of attorney, the principal must have
sufficient mental capacity when the document is drawn up. This means
that he or she must fully understand the nature and effect of the
document.
POAs
can be canceled or revoked at any time simply by destroying the
original document and preparing a new one, or by preparing a formal
revocation document informing all concerned that the POA is no longer
a valid instrument.
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