While a lot of people only think of using a power of attorney in medical cases, additional situations merit their use as well. This post will be an attempt to give you a broad overview of the purpose (and importance) of having powers of attorney created.
What is a power of attorney?
A power of attorney is a legal document in which you appoint someone to make decisions and act on your behalf under a particular set of circumstances. Those circumstances could be as serious as medical incapacitation or as convenient as allowing someone else to sign a document on your behalf because you are unable to be there in person.
Who needs a power of attorney?
Powers of attorney (POA) are not just for retired people. Anyone over the age of 18 who wants a say in who makes decisions when they are unable to perform certain actions themselves needs one. The purpose of having a POA is so that you have control over who acts on your behalf. Designating a POA prevents family conflict about which “next of kin” is the decision-maker at any given point.
Types of power of attorney
There are two types of power of attorney: medical and financial.
A medical power of attorney designates an individual to make medical decisions should you become incapacitated. (Note: It does not cover end of life care. That’s a separate document called a Directive to Physician.)
A financial power of attorney gives someone else the right to act on your behalf one time or indefinitely to sign documents, pay bills, transfer money, pay the mortgage or access bank accounts.
When a power of attorney becomes effective
When a power of attorney becomes effective depends on what type of POA it is and how it’s set up. A medical power of attorney goes into effect upon incapacitation. In other words, if you have designated your sister as your medical power of attorney, she cannot make medical decisions on your behalf until a doctor deems you unable to make those decisions yourself.
A financial power of attorney can go into effect immediately after the document is signed or upon incapacitation, depending on how it is set up. In other words, if you and your cousin share a piece of property and they live nearby but you don’t, you might make them your power of attorney so they can sign documents on your behalf while you’re away. The downside of the financial power of attorney is determining when it is effective.
In the case of incapacity, someone may have to provide proof to your financial institution. If it becomes effective immediately, it leaves you vulnerable to someone taking advantage of the situation.
In both cases, incapacitation must be determined by a medical professional.
Situations in which a power of attorney is crucial
There are any number of medical situations in which both medical and financial powers of attorney would be beneficial. The following list is not exhaustive but shows the variety of cases in which a POA could be necessary.
- Traumatic brain injury
- Going under anesthesia
As stated above, having a financial power of attorney can also serve a variety of purposes even if you’re not incapacitated. For example, in the case of someone being transferred to a new location and purchasing a house. They may need to sign the contract for the spouse who isn’t with them. A financial power of attorney can be set up specifically for one transaction if you choose.
Things to consider when creating a power of attorney
As with any legal decision, there are multiple things to consider before signing the dotted line. In the case of powers of attorney, you want to think about:
- Who do you trust to honor your wishes? Who have you given instructions to?
- Who lives in close enough proximity to carry out the duty?
- With whom should you discuss the decision? What family members need to know who you’ve designated and why?
- How will incapacitation be proven to financial institutions?
Part of a complete estate planning package
Together with a will and Directive to Physician, medical and financial powers of attorney documents are part of a full estate planning package. For help with all or any part of such package, connect with a Lovelace Law estate lawyer in Burleson or Fort Worth. We’re happy to answer any questions and help you determine the best plan for your specific situation.