A power of attorney document is where you give someone else the authority to sign on your behalf – as if they were you. A power of attorney is an important part of your foundational estate planning documents. The purpose of a comprehensive estate plan is that you cover all your bases during your lifetime and upon your death. Here’s some info about how powers of attorney work and why do you need a durable power of attorney.
Cover Your Bases During Lifetime
A power of attorney helps during your lifetime. Imagine that your elderly parent is suffering from dementia. They can’t handle their finances anymore or sign any documents for that matter. Without a durable power of attorney, someone would need to petition a court to be appointed as their guardian and conservator to be able to access their accounts and handle their affairs. A durable power of attorney makes this much more seamless.
Choose Your Agent
In a power of attorney document, you name someone as your “agent” and grant broad or limited authority to the agent to act on your behalf. You can also name alternate agents. This is an excellent tool because if you are ever incapacitated and unable to sign documents for yourself, you’re covered because you have already given this authority to someone you trust.
Types of powers of attorney:
Durable Power of Attorney
“Durable” means that the agents authority is effective immediately and remains effective if you are incapacitated. It’s generally a good idea to have a durable power of attorney because you want someone to be able to act for you if you’re incapacitated. If you’re married or have someone who you trust, a durable power of attorney is the way to go.
Springing Power of Attorney
“Springing” means that the agent’s authority “springs” into effect only upon your incapacity. A springing power of attorney works best for someone who doesn’t want an agent to have any authority for them right now, but wants to be covered in the event of incapacity.
General Power of Attorney
A “general” power of attorney is a grant of broad or “general” authority for your agent to act on your behalf. Pretty much to do anything. A general power of attorney can be durable or springing. Most people use a general durable power of attorney.
Special Power of Attorney
A “special” power of attorney is a grant of a limited power to your agent. The limits can be in both time and scope of authority. For example, you could grant a special power for a specific account or asset, or for a specific transaction. A special power of attorney can be durable or springing.
To make sure you’re covered during your lifetime, a power of attorney is a crucial part of your foundational estate planning.