All you need to know about Power of Attorney in Estate Planning
Power of Attorney: Legal Words You Need to Know
Principal: If it’s your estate plan, you’re the principal when it comes to the Power of Attorney document.
Agent or Attorney-in-Fact: the person you are naming as your Power of Attorney
Incapacitated: When a person is temporarily or permanently incapable of making decisions for their financial or medical circumstances. Don’t let the word “attorney” trip you up. The term “attorney-in-fact” does not mean that the principal must choose a lawyer to be their agent.
Power of Attorney (POA): a legal document where the principal (you) names one person (the agent or attorney-in-fact) who will be able to make decisions on your behalf in case of you having physical and mental incapacity while you are alive.
Durable POA: remains in effect until the death of the principal or the document is null.
General POA: gives the agent power to help with affairs for the principal such as check signing, managing bank accounts, taxes, and the selling of properties BUT ends as soon as the principal becomes incapacitated.
Special POA: This allows the agent to make legal decisions for the principal within very specific and clearly defined situations.
Limited POA: Just as implied, this declaration is limited to only specific actions the principal authorizes the agent to control. For example, the Limited POA may write checks but does not have full access to all bank accounts.
Medical POA: This agent is appointed to not only make medical but also end-of-life decisions. The Medical POA is also responsible for handling medical expenses. A Medical POA and **Healthcare Proxy ** are different; however, they may apply to the same agent or separate agents.
Financial POA: As implied, the financial POA handles any financial issues authorized by the principal.
Why do I need a Power of Attorney?
Now that we’ve gotten all the jargon out of the way let’s go over who actually needs a POA in their estate plan.
Do you have bank accounts and investments? You need a POA.
Do you have property or other assets? You need a POA.
Do you have a body that could potentially get very sick or temporarily/permanently disabled? You need a POA.
Do you have a brain that could be impacted by cognitive decline or damage? You need a POA.
I think you get the idea: if you’re alive and over 18, you NEED a Power of Attorney. Speaking with a professional estate planning team can help you identify which kinds of POAs would be right for you and who the agent(s) should be.
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