A last will and power of attorney are important parts of any estate plan. Together these documents can provide a great many protections as you plan for the future.
What is a last will and testament?
A last will and testament is a document that allows you to decide who will inherit your assets after you die. As the testator, you select who your heirs will be and what they each will receive.
You also name an executor, who will be responsible for distributing your assets in accordance with your wishes. A last will can also be used to name a guardian for your minor child. Last wills must be signed in front of witnesses.
What is a power of attorney?
A power of attorney (POA) is a legal document that authorizes someone else (called the attorney in fact) to make business, legal, and financial decisions on your behalf. If you become unable to manage your own affairs, the person you choose will be able to do it for you. Your attorney in fact will be able to pay your bills, make repairs to your home, sell your car, run your business, and more.
If you do not have a power of attorney, a court proceeding is necessary to prove you are mentally incompetent and have a guardian appointed.
If you execute a power of attorney, you can choose the person you prefer and there is no delay between the time you need someone to handle your affairs and the time they can do so.
Each state has its own power of attorney form. The document must be signed and notarized in most states to be valid.
Types of powers of attorney
While all powers of attorney serve the same function of giving someone else authority to act for you, there are several types:
- A durable power of attorney. This type is applicable from the date it is executed. If you sign it today, your son can manage your bank account tomorrow without any further authorization. It doesn’t matter whether you are incompetent or not.
- A springing power of attorney. This type of is executed but does not go into effect until the occurrence of some event, usually the incapacity of the person creating the form. If you create a springing power of attorney today, your son cannot access any of your financial affairs until you are unable to do so yourself. Generally, a physician’s letter or documentation is necessary to place this type of power of attorney into effect.
It is also possible to pick and choose what authority your power of attorney will give your attorney in fact. Some states have boxes you can check so you can choose specific types of authority to give. A financial power of attorney might give your son only the right to manage your financial affairs, such as paying bills, but not the right to do things such as sell your real estate.
Hand in hand
It is almost always recommended that you create a will and power of attorney together. The power of attorney provides protection during your lifetime, while the will provides protection after your death. Together they provide an ongoing umbrella of protection for your assets.