Have you ever wondered exactly what a power of attorney is? More importantly, do you know why it may be vital for you to have one?
A power of attorney is very important when it comes to estate planning. A power of attorney is a legal document that allows you to grant someone else, an “attorney-in-fact,” the power to act on your behalf for financial or other purposes. This usually happens if you happen to become incapacitated or if for some reason you are unable to act on your own behalf.
When it comes to powers of attorney, there are several different kinds that are used for different purposes. Here are the different options of power of attorney that you can consider for your situation:
- Limited. As this type implies, this form of power of attorney allows the agent to act on your behalf for a very limited purpose. This type is used for a limited basis, usually for a one-time financial or real estate transaction. This would be used if you have a prior commitment or illness and would allow your agent to act one time with no other authority than what is assigned to them.
- General. A general power of attorney provides your agent the ability to make all the same decisions you can make. You would want to use this type when you need someone to handle your affairs for you. You would choose this when you have become incapacitated and need to have somebody protect certain interests when you cannot.
- Durable. A durable power of attorney can be limited or general in its abilities but will remain in effect even if you lose the ability to make choices or become incapacitated. If you do become incapacitated, without durable power of attorney you will not have any representation unless a court appoints a guardian or conservator. A durable power of attorney would remain in effect until you change it once you are not incapacitated or until your death.
- Springing. A springing power of attorney will only take effect once certain conditions are met. For example, the moment you become incapacitated. If you are going to use a springing power of attorney, you will want to make sure it is clearly stated in the document when the power of attorney can be initiated.
The final major consideration you need to take when designating a power of attorney is who your agent will be. This attorney-in-fact will have strict control over your finances and will be making major decisions on your behalf. Appointing someone you fully trust is crucial.