Types of Power of Attorney
Using a power of attorney for estate planning
We all make decisions about ourselves and our dependents. But often people do not take into account what might happen if they are unable to make those decisions. An estate planning law firm helps you plan for those instances in which you are unable to make decisions for yourself.
An essential tool in estate planning is a power of attorney. A power of attorney is a commonly used, written document authorizing one person to make certain decisions, usually financial, on behalf of another person. There are two types:
Agent or Attorney in Fact: The person you are designating to make decisions for you if you are incapacitated.
Principal: The individual on whose behalf the agent works.
Creating a power of attorney is important for anyone with property, income, or other assets. Most people do not expect to become incapacitated when they are younger. A power of attorney is a smart tool to plan for when we are older. Different types of power of attorney include:
Durable power of attorney: Becomes effective as soon as the document is signed and continues to be effective if the principal becomes incapacitated.
Springing power of attorney: Becomes effective only upon declaration of the principal as mentally incapacitated.
Medical power of attorney: Empowers your agent to make healthcare decisions on your behalf if you are unable to communicate or are physically incapacitated.
Designating an agent provides someone to step up when you cannot. An agent can be paid for their services, but only if that payment is described in the power of attorney itself. Types of transactions an agent are expected to perform include:
Choosing an agent, either financial or medical, to act on your behalf may be one of the most important decisions of your later life. Consider these points when selecting your designee:
Financial management skill: Is your choice skilled and organized with money?
Age: Choose someone over 18.
Locality: Is your choice close enough to help you?
Use an agent to look after yourself and your finances. An agent can make decisions easily now, but there may come a time when we cannot. Estate planning law firms can help prepare for those times when you cannot.
