What is “Power of Attorney” and who should I give it to?
A power of attorney (POA) agreement is a written document that allows you to legally appoint a person or organization to manage your affairs if you are unavailable or become unable to do so. When you set-up a Power of Attorney agreement, you create a legal relationship in which you are the principal and the person you appoint acts as your agent.
Types of powers of attorney
There are several types of powers of attorney arrangements. Each one serves a different purpose and grants different levels of control over your decisions. Here are the three primary types of Powers of Attorney:
General Power of Attorney – broadly authorizes your agent to act on your behalf in your personal and financial affairs. It’s ideal if you will be out of the state or country and need someone to handle matters while you are gone, or if you are physically or mentally incapable of managing your affairs yourself.
Special Power of Attorney – allows you to specify more limited powers to you agent, like the ability to access your safety deposit box or to sell a home in your absence. This is often used when you cannot manage certain affairs due to other commitments or health reasons.
Healthcare Power of Attorney – legally authorizes your agent to make decisions about your medical care when you are unconscious, mentally incompetent, or otherwise unable to make decisions. It is not the same as a Living Will, however. A Living Will only allows you to communicate your wishes concerning life-sustaining procedures.
With additional text added to the document, any of the three types of power of attorney can be made durable. Durable means that the power of attorney will remain in effect, or go into effect, if you become mentally incompetent.
To whom do I give the power?
Choosing a person to serve as your agent for power of attorney shouldn’t be taken lightly. It’s an important decision. Whether you choose your parent, spouse, adult child, friend, business partner or attorney, trust is the key factor. Because this person will be acting on your behalf, it’s vital that you choose a trustworthy individual who will act in your best interests.
There are also other considerations, like location or proximity to you or how you’ve seen them handle their own finances and legal affairs. Are they organized and detail oriented? Could they manage or would they be willing to take on the additional responsibility?
Once you decide, be sure to have a conversation with your potential agent to discuss your wishes and the duties of the position, as well as the commitment you’re looking for. Once you’re both on the same page, you can rest easier knowing you’ve communicated your expectations.
Accurate records, regardless of trust
Because your agent is acting on your behalf, it is critical to keep accurate records of all the executed transactions and to provide you with updates. If for some reason you are unable to review them on a timely basis, be sure to assign the review to a third party.
Remember, you can revoke power of attorney at any time and for any reason. However, if you ever become weary of your agent’s trustworthiness or if a conflict of interest arises, you should terminate the agent’s authority immediately. Simply notify your agent and your financial institution in writing and ask for all copies of your power of attorney to be returned.