When you have complex financial, family, or investment arrangements, thinking about what could happen in the future is often anxiety-inducing. Who will be able to make important financial decisions about investments or property? If necessary, who can make healthcare decisions when you’re not able? Unfortunately, without PoA, the answers can involve lengthy court battles and court-appointed conservators.
Forward planning isn’t quite as easy as finding a free durable power of attorney template, but it’s a start.
What is a Power of Attorney?
Power of Attorney isn’t complicated in its basic form — it’s just a legal concept that authorizes a third-party, known as an agent or attorney-in-fact, to act on your behalf in defined scenarios.
PoA is often given when you need someone to make financial decisions for you or to act on your behalf, e.g., an accountant for tax purposes, as well as healthcare decisions if you lack the capacity to make them yourself.
Types of PoA
- General PoA: This grants broad authority to your agent, but it becomes invalid if the principal becomes incapacitated
- Durable POA: Durable POAs remain effective even if you become incapacitated (under the UPOAA in states which have enacted it, this is the default kind of POA for financial/legal matters)
- Medical PoA: These POAs allow your agent to make healthcare decisions for you when you’re unable to make them
- Limited/Special PoA: These grant authority for a specific, limited task, duration, or scope, e.g., to an accountant for tax
- Springing POA: A springing POA comes into effect after a specified event has taken place, e.g., if you become incapacitated
Benefits of Having a PoA
There are many practical reasons to have a PoA in place, including:
- Prevention of court interventions: Without a PoA, courts may need to appoint a guardian or conservator, which is time-consuming, can be costly, and may result in an appointment you would not have made yourself
- Continuity: By selecting an appropriate agent, you can ensure that whoever manages your affairs is able to do so without interruption — and in a way you would approve of
- Prevention of family conflict: During stressful or difficult times, family conflicts can be even more difficult to manage. When you designate a clear agent and back them with legal authority, this can help prevent disputes among family members over who should make decisions.
- Peace of mind: Knowing you have a trusted individual who can carry out decisions on your behalf can allow you the space necessary to relax and offer reassurance for you and your family that all your affairs are in order
How to Create a POA
Creating a Power of Attorney can be simple if you follow basic steps and processes.
- Determine the type needed: Consider whether you need a general POA, a durable POA, or a specific medical POA (e.g., if you have a health condition likely to incapacitate you), or whether a limited POA is appropriate (e.g., for tax purposes).
- Select an agent: Your agent should be a trusted, trustworthy person who will act on your behalf.
- Draft the document: Work with a legal professional or find an acceptable, reputable template to create your document.
- Sign and notarize: Some states require only witnesses, others require only notarization, and some require both — make sure you follow state laws.
- Distribute copies: You should provide copies of this document to the relevant agencies, such as healthcare providers, your agent, and financial institutions.
Common Myths and Misconceptions
There are some common, persistent myths and misconceptions about POAs, so let’s take a look at some of them.
- Power of Attorney allows agents to make decisions after your death: This is not the case. While some states, such as CA or OR, allow agents to make limited post-death decisions, upon death, POAs become void and decisions are made according to a will or the executor of an estate.
- You can’t change a POA after it’s signed: As long as you have mental competence, you can change or revoke POAs.
- PoA is only for the elderly or ill: Anyone can establish a POA, and it’s a great way to plan for any eventuality.
- PoA agents can act however they want: This is incorrect, because agents have a fiduciary duty to you and must act in your best interests. They are also bound to act only within the terms of the document.
Final Thoughts
Power of Attorney isn’t something you only need to think about when it’s necessary. It’s a proactive step taken to secure your future and keep your affairs in order, no matter what happens. Consider your specific needs, your healthcare choices, and any complications that could arise from poor planning — and get a POA in place so you don’t need to worry about them when the time comes.
