A power of attorney, often referred to as a POA, is a legal document that grants someone the authority to act on behalf of another person, known as the principal, in various legal and financial matters. The person granted this authority is called the “agent” or “attorney-in-fact.” The principal can give the agent broad or limited powers, depending on their specific needs and intentions.
Types of Power of Attorney
There are many different types of power of attorney, and each serves a specific purpose. Some of the types of POAs include:
-General Power of Attorney
-Limited or Special Power of Attorney
-Durable Power of Attorney
-Springing Power of Attorney
-Medical Power of Attorney (Health Care Proxy).
-Financial Power of Attorney
The POA Role in Estate Planning
A POA plays a crucial role in estate planning by allowing individuals to designate someone to manage their financial and legal affairs in the event they become incapacitated or are unable to handle these matters themselves. There are two main categories Power of Attorney can be broken down into: Financial and Medical. Below provides a breakdown for each of these categories and how it fits into estate planning:
Medical Power of Attorney/Living Will
A medical POA, also known as a healthcare POA, is a legal document that allows an individual (the principle) to appoint another person (the agent) to make medical decisions on their behalf if they become unable to make those decisions themselves. This document is part of advanced healthcare planning and is designed to ensure that a person’s medical wishes and preferences are followed when they are no longer capable of expressing them. These incudes end of life care decisions such as:
-Choosing treatment options
-Consenting to or refusing medical procedures
A medical power of attorney takes effect when the principle is deemed medically incapable of making decisions, as determined by a healthcare professional. The agent’s authority ends when the principle regains capacity to make decisions or when they pass away.
A medical POA is often a part of a broader set of advance directives, including a living will, which outlines specific medical treatment preferences. If you do not already have a living will in place, or would like to learn more about what that entails – contact Liriano Law Firm for a free consultation.
Financial Power of Attorney
A Financial POA will cover the topics of financial management, asset management, estate tax planning, and business interests.
- Financial Management: A durable power of attorney can be especially important in estate planning. It allows you to designate an agent who can step in and manage your financial affairs if you become mentally or physically incapacitated. Without a POA in place, your loved ones might have to go through a time-consuming and costly legal process, such as guardianship or conservatorship, to gain control over your finances.
- Asset Management: Your agent, as specified in the power of attorney document, can handle various financial matters, including paying bills, managing bank accounts, making investment decisions, and handling real estate transactions. This ensures that your assets are managed and protected according to your wishes, even when you cannot do so yourself.
- Estate Tax Planning: Your agent can help with estate tax planning by making financial decisions that are in line with your overall estate planning goals. This can include transferring assets to a trust, gifting strategies, or other actions to minimize estate taxes.
- Business Interests: If you own a business, a POA can allow your agent to manage your business interests, make decisions on your behalf, and ensure the continued operation of the business during your incapacity.
Having a clear power of attorney in place can help prevent family disputes and conflicts that may arise when loved ones disagree about financial decisions or healthcare choices. By designating an agent and specifying your wishes, you provide a legal framework for decision-making.
Creating a POA is an important legal decision and should be done carefully with the guidance of an estate planning attorney to ensure it meets the specific needs and intentions of the principal. It’s crucial to choose a trusted and responsible agent, as they will have the legal authority to make decisions that can significantly impact the principal’s life and affairs. Additionally, the laws governing powers of attorney may vary by jurisdiction, so it’s essential to follow the applicable legal requirements in your area. If you are interested in learning more about what a POA is, the different types of POAs, or how they can factor into proper estate planning services, Liriano Law is happy to help. Call Carmen today and schedule a free consultation today.