A power of attorney (POA) is a legal document giving someone the authority to act on behalf of another person in specific or all legal or financial matters.
This kind of document becomes important if a person is incapacitated or unable to make decisions on their own, say if they get sick or fall into a coma.
It’s very important to get a POA in place if you expect a loved one to manage your affairs at a time when you might not be able.
Types of powers of attorney
Before creating a power of attorney, you should be familiar with your options and the ones that are available in your home state.
The person who will be acting on your behalf is called your “agent” or “attorney-in-fact.”
No power of attorney document is legally binding before it’s signed and executed according to the laws of your state.
This means that no agent can make decisions on your behalf before the POA document goes into effect. You must also be of sound mind when you appoint an agent.
Specific power of attorney
A specific power of attorney allows your agent to handle only certain tasks, such as paying bills or selling a home, and usually on a temporary basis.
General powers of attorney
With general powers of attorney, your agent is given broad authority. They can handle all of your legal and financial affairs on your behalf.
In the event that you become incapacitated while holding one of these documents, that authority may end.
Durable power of attorney
In a durable power of attorney, your representative may have a limited scope of authority or broad authority to handle all your legal and financial affairs, but that authority remains with the agent even if you become physically or mentally incapacitated.
This means that your family may not have to ask for a court to intervene if you have a medical crisis or have severe cognitive decline such as late-stage dementia.
Sometimes, medical decision-making is included in a durable power of attorney for health care. This may be addressed in a separate document that is solely for health care, like a health care surrogate designation.
Some states recognize “springing” durable powers of attorney, which means the agent can start using it only once you are incapacitated. Some states don’t, which means the day you sign the durable power of attorney, your agent can use the document.
Again, a power of attorney (POA) is a legally binding document that allows you to appoint someone to manage your property, medical, or financial affairs.
Although it can be uncomfortable to think about needing it, a POA is an important part of your estate plan.