There are many reasons to use a power of attorney, and there are many types of powers of attorney. Some are a good idea to have in place now, because you never know when an emergency may arise and a power of attorney will be needed. Other types of powers of attorney may only be needed if a particular situation arises.
Who Needs a Power of Attorney?
Anyone who wants to permit another person to perform certain legal acts on his or her behalf needs a power of attorney (or POA). A power of attorney document can allow another person to handle financial matters, make health care decisions, or care for your children. Many states have an official power of attorney documents that are easy to use.
To understand powers of attorney there are a few legal terms you need to know.
- Agent. A person who is given authority by a POA. Also called an attorney-in-fact (which has nothing to do with being a lawyer).
- Durable Power of Attorney. A POA is durable if it continues in effect after you become incapacitated.
- Limited/Special Power of Attorney. A POA that confers less than full authority upon the agent. Many power of attorney forms give the agent authority that is as comprehensive and broad as possible. A limited power of attorney grants less authority, sometimes referred to as a special power of attorney, grants less authority. It might only give a few specified powers, or might only apply to a single financial transaction, or might only exist for a short period of time.
- Principal. A person who executes a power of attorney to give another person authority to act on his or her behalf.
- Springing Power of Attorney. A POA is considered springing if it is not effective immediately, but becomes effective in the future due to the occurrence of specified events, for example, if it becomes effective upon your incapacity.
Financial Power of Attorney
A financial power of attorney can be used for a single transaction, for certain types of transactions, or for all transactions. So, do you need a power of attorney for finances?
It is a good idea to have a springing durable financial power of attorney as part of your estate plan. This will enable someone you trust to handle your financial matters in the event you become incapacitated. Otherwise, it may be necessary for a loved one to petition a court to appoint a guardian or conservator of your property, which is an expensive, time-consuming and emotional process.
Occasions may arise where you need a limited financial power of attorney. This usually occurs when you are involved in a financial transaction but can’t be present to sign documents. For example, you could execute a power of attorney that allows your spouse, a business associate, your lawyer, or a friend to attend a real estate closing and sign documents on your behalf. Or you could authorize someone to sign documents to transfer title to a motor vehicle.
Health Care Power of Attorney
A health care power of attorney gives your agent the authority to make medical treatment decisions for you in the event you are unable to do so. This can be because you are mentally incapable of making an informed decision, or are unable to communicate a decision. The agent’s authority is not limited to end-of-life decisions (often covered in a living will) but extends to medical decisions that do not necessarily involve life-or-death situations. For example, you may be temporarily unconscious due to a motor vehicle accident, and your agent must weigh the benefits and risks between immediate surgery and trying medication first.
Health care powers of attorney are sometimes called an advance directive, a designation of patient advocate, a health care surrogate, depending on each state’s laws.
Your agent’s authority only exists while you are incapacitated. In the event you regain the ability to make and communicate an informed decision, you also regain the ability to make the decision.
So, do you need a health care power of attorney? It is a good idea to have a health care power of attorney as part of your estate plan. In the event you become incapacitated and do not have a health care agent, it may be necessary for a loved one to petition a court to appoint a guardian, which is an expensive, time-consuming, and emotional process.
Child Care Power of Attorney
Some states permit a child care power of attorney, which authorizes your agent to make decisions regarding the care of your child. This is typically done when a child will be temporarily living with relatives or others in a location some distance from the parents. Such a power of attorney may cover things such as enrolling the child in school, consenting to field trips, and even making emergency medical treatment decisions in the event a parent cannot be reached quickly.
Choosing an Agent
The question “Do I need a power of attorney?” is only the first question. Once you decide that a power of attorney is needed, you need to ask “Who do I trust to be my agent?”
- Finances. For a financial power of attorney, it is important that you have confidence in your agent’s financial knowledge and ability to make good financial decisions.
- Health Care. For a health care power of attorney, it is important that you talk with your agent about your wishes for your medical care. Do you want everything possible to be done to keep you alive? Do you want some procedures and treatments, but not others? Are there certain circumstances in which you wouldn’t want anything done? You may spell out such desires in the power of attorney itself, or in a separate document called a living will or advance directive.
Provided you have a person you can trust, you should have a power of attorney for both finances and health care. Special circumstances may also indicate a limited power of attorney is needed.
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This article was originally published in July 2015 and updated in November 2018.