Power of Attorney: A Useful Guide

Julia Carlson |
Categories
Power of Attorney
Estate Planning
Financial Planning

Have you ever wondered who would make decisions on your behalf if you were unable to? Are you concerned that they might not follow your wishes? If so, a Power of Attorney could be a valuable tool for you.

What is a Power of Attorney (POA)?

A Power of Attorney (POA) is a legal document appointing someone (the agent or attorney-in-fact) to act on behalf of another (the principal) under specific circumstances. Often used for incapacity or estate planning, POAs are customized to the principal's wishes.

Are there different types of Power of Attorney?

POAs have their own specific scope and purpose. Here are the most common types:

  • General POAs: Grant broad authority for finances, legal documents, and decision-making. Often used for temporary incapacitation and illness.
  • Durable POAs: Takes effect when the principal is incapacitated. Commonly used for long-term planning, especially in cases of illness or injury.
  • Springing POAs: Activates under specific circumstances, like absence or incapacity.
  • Medical POAs: Focuses on healthcare decisions, including medical treatment, end-of-life care, and organ donation.
  • Limited POAs: Grants narrow authority for specific tasks like selling property or managing a specific financial matter.

What are the limitations of POAs?

Agents cannot exceed the scope of their authority as outlined in the POA document. Additionally, they cannot create or modify estate plans, vote on behalf of the principal, or undertake activities not explicitly stated in the POA document. Without authorization, a POA cannot transfer principal's money to personal accounts, borrow from the principal, invest in personal ventures, or self-deal without authorization.

What are the responsibilities of an agent or attorney-in-fact?

Their responsibilities can vary depending on the specific powers granted in the POA document. Responsibilities could include:

  • Managing finances: Paying bills, managing bank accounts, investing assets, and collecting income.
  • Making healthcare decisions: If the principal is incapacitated, the agent may need to make decisions about medical treatment, hospitalization, and end-of-life care.
  • Filing taxes: File tax returns, pay tax bills, oversee corporate taxes, and ensure tax compliance.
  • Handling property: Buying, selling, renting, or leasing property on behalf of the principal.
  • Signing legal documents: The agent may need to sign contracts, deeds, or other legal documents on the principal's behalf.
  • Representing the principal: The agent may need to represent the principal in legal matters or negotiations.

Where do I get a POA?

Consulting with an attorney is the most reliable way to create a POA. They can also help you understand your options, tailor the document to your specific needs, and ensure it is legally valid.

In conclusion, being an attorney-in-fact is a significant responsibility, and it is essential to communicate your wishes clearly to your agent – clarify your expectations! And, share your POA with pertinent individuals like your agent, financial institutions, and healthcare providers. It’s the best way to ensure you wishes are followed when you are unable to make them yourself.

Information in this material is for general information only and not intended as investment, tax, or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision. Email me your questions at info@financialfreedomwmg.com or call/text 458.777.4458.  You can also post your question on our Facebook page: https://www.facebook.com/FinancialFreedomWealthManagementGroup or find us on Instagram @financialfreedomwmg.