You have likely heard the term power of attorney, but you may not know exactly what it means, how it is used, or any of the specifics. Essentially, it is a type of legal authorization that allows a person to have the power to act for another person. The person who is given the power of attorney is typically called the agent, while the person they can make decisions for is called the principal.
A power of attorney is often used when the principal has a temporary or permanent illness or disability, or when the principal is not available to sign certain documents.
The types of power of attorney include general, limited powers, and durable. A general power of attorney allows the agent to act for the principal in any matter that is allowed by the laws of the state. For example, they could manage assets, handle bank accounts, sign checks, or file taxes for the principal.
A limited power of attorney on the other hand narrows what the agent can do. For example, it might state that the agent only has the power to manage certain types of accounts or to make certain types of decisions. The limited aspect could also refer to the power only being in effect for a set amount of time. For example, you might leave the country for six months or a year and allow someone else power of attorney during your time away.
When you are setting up a power of attorney, you will want to determine the scope of power that you want to provide to another person. Naturally, this will vary from case to case. You should talk with your attorney about your options.
A durable power of attorney handles some of the legal, property, and financial matters when someone is mentally incapacitated. The agent with a durable power of attorney can pay medical bills on behalf of the principal, but they can’t make major medical decisions.
However, if a principal wants an agent to have this power, they can choose to sign a healthcare power of attorney, where they can become a healthcare proxy. Financial power of attorney is another type of durable power of attorney. This can allow the agent to manage the business and financial affairs of the principal.
Completing advance directives is a responsible part of building your estate plan. Not only do…