Power of Attorney: An Overview
Power of Attorney: An Overview
Granting someone a power of attorney is a decision that requires great trust and great responsibility. If you’ve been asked to serve as someone’s power of attorney, or you’re considering granting that power to someone, you may have a few questions about what the role entails. We’ve compiled a quick overview of how a power of attorney document works.
Power of Attorney: A Working Definition
When someone is granted a power of attorney, that person has the legal right and responsibility to manage another individual’s financial affairs, medical decisions, and property issues. Power of attorney documents can be incredibly specific or limited in scope, while others can grant a wide range of decision-making power to someone you trust. In some cases, the POA commences immediately after the legal paperwork is signed, while others transfer power of attorney only in the event of incapacitation. We’ll walk you through all these differences in our guide below.
Durable Power of Attorney and Non-Durable Power of Attorney
As the name implies, a durable power of attorney grants decision-making responsibility to the individual of your choice. (That person is called “the agent” or “the attorney-in-fact” in the legal paperwork.) That individual retains that power of attorney even in the event of your physical injury or mental incapacity. A non-durable power of attorney grants that power to an individual while you are still of sound body and mind, but the power is rescinded if you suffer catastrophic bodily or intellectual injury, or become incapacitated.
Springing Power of Attorney
This type of POA document will grant a power of attorney to an individual only upon your designation as mentally incompetent. With this power of attorney, the individual remains in full control of decision-making until a court finds them incapacitated. The only downside to electing for this POA type is that the question of mental fitness can be somewhat subjective. Since it requires an official legal declaration of incompetence to transfer your POA to the individual in the paperwork, it can get caught up in red tape when important decisions need to be made.
Power of Attorney Areas
Any individual can designate the decision areas their power of attorney can address. Power of Attorney is not a one-size-fits-all designation, and you can tailor your power of attorney to match your needs and the needs of your estate. If you’d prefer medical decisions be made by the individual, but not financial decisions, that’s well within your right to choose. Or, if you’d like any decisions to be made about property to be covered by one individual, while financial decisions are made by a second individual, you can also designate that in your power of attorney document. While there are standard powers granted, the POA is an incredibly flexible legal document that can be customized to suit an individual’s specific needs and concerns.
Altering or Terminating Power of Attorney
If circumstances or plans change, a power of attorney document can always be terminated or altered through a lawyer. You can change the terms of the document, add additional limits or expand decision-making powers, and even designate a backup power of attorney in the event that your initial agent is unable to serve. In fact, many lawyers advise having a secondary power of attorney to allow for this circumstance.
Prepare for Estate Planning with Southwestern Investment Group
Estate planning is complicated, but planning for the future is something Southwestern Investment Group can assist you with. We have years of experience guiding people of all ages through the process of saving and investing over the course of their lifetime. If you have questions about your current investment strategy, reach out to Southwestern Investment Group today to schedule a consultation.
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