At some point people with a chronic disease or terminal illness may become incapable of making or unwilling to make important decisions about their finances,d estate, and/or business and may need a reliable person to take over long-term or permanently . This also can be useful for short-term situations, such as major surgery or a temporary impairment of mental status.
Financial power of attorney is an important part of estate planning that allows you, the principal, to give legal authority to one person, usually a spouse, adult child, or other close relative, to act for you on behalf of your estate.
This person is typically referred to as your “agent” or “attorney-in-fact” and can act independently, even without consulting an attorney. Financial POA can either be durable or limited based on the purpose of the particular circumstances.
Power of attorney is granted using a legal document that must be notarized and should be presented to any party your agent is dealing with. The power is limited to the actions listed in the document, which may be further limited by state-specific laws. Many states have an official financial power of attorney form to assist with this.
You should regularly review and revise the power of attorney document when circumstances or preferences change, such as moving, changes in your estate that require different actions, a divorce, or death of an agent.
If you do not plan ahead the courts will become involved and you may be unable to manage your estate and have a say in who is chosen as guardians, conservators, or committees to manage your estate.
Power of attorney (POA) is not a single entity but a flexible tool to accommodate a variety of situations.
The terms used for a POA can be confusing, but basically each POA has four characteristics that can contribute to the name of the POA; duration, area of authority, scope of authority, and when it begins.
In many cases you may be sharing decision making with your agent, especially if you are only physically unable to perform financial responsibilities.
Area of Authority
Special or Limited POA
Only specific tasks that you designate
When task is done, POA expires, or you become incompacitated (most states)
To act on your behalf for any indicated tasks, usually financial or estate related, while you are unable to perform them due to health or availability
General, financial, care issues, or health care
Until revoked or your death
To act on your behalf for any indicated tasks if you become unable to for a prolonged period or permanently.
Traditionally Power of Attorney will be in effect until any of the following:
The most important thing when choosing an attorney-in-fact or agent is to choose someone you trust, although they can’t be a minor or unable to function as your agent for whatever reason. Many states will have specific restrictions, such as a history of criminal behavior.
Integrity is key, so pick someone who will look out for your best interests, respect your wishes, and won’t abuse the powers granted to them. An agent is held legally responsible only for intentional misconduct, not for unintentional errors.
You will most likely choose a family member, such as your spouse or adult children. You may also choose a friend, another relative, organization, or a professional such as an attorney.
You may choose two or more co-agents, with similar or different responsibilities.
Many of the powers you could give to your agent are regulated by and differ from state to state. If you have assets in different states, make sure that state allows agents to perform those actions.
Remember that, whatever actions you want your agent to do, they must be spelled out in detail in the document. Some may need to be authorized by the state. For example, some states allow your agent to make gifts legally, while in other states the agent needs to get it explicitly authorized in their power of attorney document.
Common powers or actions include any or all of these.
Financial and legal matters that you can include.
Seeing to your care and the upkeep of your residence.
You may also specify that they can make medical decisions, but a separate Healthcare POA or Proxy is better for this.
Actions by the agent need to be signed in a specific way, usually either of:
Actions that can’t be performed include:
Fill in the form including the following.
These are some common reasons for changing agents or powers or revoking the POA.
Your child may be able to change your power of attorney in the few situations that it may be needed. It may be simple or difficult, time-consuming, and expensive.