A power of attorney is an important part of any estate plan because it anticipates situations where someone becomes incapacitated or disabled. This document can protect your medical and financial interests if you no longer can. There are many types of powers of attorney, and each serves a different purpose. So why do you need a power of attorney, and when should you create one? Today, we’ll examine this question.
What Is a Power of Attorney?
A power of attorney is a legal document that allows you to appoint a person or entity to make financial or medical decisions for you if you become unable to do so yourself. There are two main players in a power of attorney: the principal and the agent. The individual giving the power (i.e., the person creating the document) is the principal. The agent is the person or entity with authority to make decisions on the principal’s behalf. An agent may also be referred to as an attorney-in-fact. You can (and should) have a primary and secondary agent in the event the primary agent is unable or unwilling to fulfill their role.
A power of attorney is no longer effective when the principal dies.
Types of Powers of Attorney
Powers of attorney are completely customizable. You can grant broad or limited decision-making authority to the agent and choose when the document takes effect. Let’s look at some of the different types of powers of attorney.
Durable Power of Attorney
A durable power of attorney is when the agent can continue to act even if the principal incurs a disability or loses their decision-making capacity. In other words, the document remains effective until the principal revokes it or dies. With a durable power of attorney, the agent has a wide range of powers unless the principal specifically limits their authority to act. For example, an agent can do any of the following:
- Sign documents,
- Establish and access bank accounts,
- Buy and sell real property,
- File and pay taxes,
- Acquire life insurance policies, and
- Access the principal’s electronic communications.
With the power to make such impactful decisions for you, it’s important to choose an agent that you trust and someone who has your best interests at heart.
Springing Power of Attorney
With a springing power of attorney, the agent’s powers only take effect when a certain event occurs. For example, the principal may instruct that the power of attorney kick in only when they become mentally incapacitated.
Financial Power of Attorney
A financial power of attorney grants the agent decision-making authority over transactional matters. They can be used in a limited situation, such as if you’re unable to be physically present at a document signing. Alternatively, you can appoint your agent to make all financial decisions for you.
Medical Power of Attorney
A medical power of attorney (or Appointment of Health Care Agent) allows your agent to make decisions regarding your medical treatment if you’re unable to do so. The healthcare agent can decide the following for the principal:
- Type of medical care and treatments;
- Which doctors provide care;
- Where the principal resides (e.g., private home, assisted living facility, or nursing home); and
- Personal care practices.
It’s important to note that your agent can’t override your decisions. You have to be incapable of making your own decisions, but your lack of capacity can be temporary. Once you regain the capacity to choose your own medical care, your agent cannot act on your behalf.
Why Would You Need a Power of Attorney?
Now that you know the basics, the next question is usually, Why do you need a power of attorney?
Life is uncertain. If you were in a debilitating accident or became ill and lost your mental capacity, who would care for you? Who would ensure your children are provided for? Who would pay your bills, manage your investments, or instruct the doctors on how to treat you? Without a power of attorney, whether it’s a financial or medical one, you leave life-altering decisions up to someone that a court appoints. This document gives you a certain amount of control over unpredictable events by allowing you to select the person to care for you and your family.
With a power of attorney, you make your wishes clear. Your family and loved ones don’t have to guess what you would have wanted or argue over what’s best for you. Your agent has the authority to make decisions in accordance with your intentions and desires.
Remember, powers of attorney can be created for limited situations. For instance, if you travel internationally for an extended period of time, you may want to appoint an agent to monitor your affairs.
Peace of Mind
A comprehensive durable power of attorney that gives the agent broad powers can offer you peace of mind. For example, if you become incapacitated, your agent could maintain your household’s expenses and make monetary gifts to family members. A power of attorney ensures that your personal affairs are attended to when you can no longer manage them on your own.
When Do You Need a Power of Attorney?
If you want to permit someone to act on your behalf, then you need a power of attorney. Since life can change in an instant, there’s no “right time” to execute a power of attorney. If you’re 18 or older and have assets, a family, or just want to designate a person to handle your affairs if you’re unable to—then now is when you need a power of attorney.
Let Us Create Your Power of Attorney
Do I need a power of attorney? If you’re still pondering this question, the answer is likely yes. To ensure you have adequate protection if you become incapacitated or disabled, consider speaking with an attorney today. The attorneys at Batson Nolan PLC can help. Since 1860, we have been offering excellent legal services to Tennessee residents. We prioritize efficiency and collaboration and provide individualized attention to each client. Call us or contact us online to schedule an appointment with one of our estate planning attorneys.