Power of Attorney
A power of attorney document is a legal instrument which allows an individual to appoint a different individual to manage certain aspects of their life. The person appointed by the power of attorney document is legally permitted to act on important matters which can include paying bills, employing professional help, handling finances, managing investments, making medical decisions, filing insurance claims, or handling business interests.
Power of Attorney Roles
Principal
The principal is the individual who has created a power of attorney document to authorize another to act on their behalf.
Attorney-in-Fact / Agent
The attorney-in-fact (sometimes referred to as the agent) is the individual designated by the power of attorney document who has the authority to act on the principal’s behalf.
Who Can Act as Attorney-in-Fact
The principal can appoint anyone to act as their attorney-in-fact using a power of attorney document. The appointed agent does not have to be a lawyer, and the scope of their power is defined entirely by the power of attorney document.
Who Can Execute a Power of Attorney Document
Like all other legal contracts, the principal must be of majority age (18 years old in most states) and mentally competent to execute a power of attorney. Additionally, the individual creating a power of attorney must be acting by their own choice, without any undue pressure (duress) by a third party. Witness requirements to execute the POA vary by state. It is important to note that some jurisdictions also require the POA to be filed with a local government office.
Types of Power of Attorney
There are several types of power of attorney which can be used to address different situations. Each type comes with certain limitations – and limitations vary by state. Generally speaking, there are three main varieties of power of attorney:
Conventional
A conventional power of attorney begins when the principal signs the document and ends when the principal becomes incapacitated.
Durable
A durable power of attorney begins when the document is signed and “endures” when the principal becomes incapacitated. A durable power of attorney document is a good tool to ensure an individual’s medical and/or financial wishes are honored should they become incapacitated by injury, illness, or cognitive decline.
Springing
A springing power of attorney begins when a specified event occurs and grants the attorney-in-fact with authority to act on the principal’s behalf. The specified condition can be any number of events ranging from incapacitation due to injury or illness, to granting the agent authority when the principal vacations overseas or travels to a warmer climate during the winter.
Regardless of the type of power of attorney, all powers of attorney expire at the time of the principal’s death. For the agent to continue acting on the principal’s behalf after their death, a different legal document is needed.
Benefits of Having a Power of Attorney
There are a variety of reasons an individual may designate a power of attorney. The most common reason is to ensure your medical care preferences are honored should you become incapacitated. However, incapacitation is not the only reason for having a power of attorney document. Granting a third-party, such as a life care manager, a POA can enable them to effectively coordinate care between doctors, manage in-home care services, and handle insurance claims.
Additionally, a properly drafted power of attorney can help prevent litigation between family members over medical and financial decisions by clearly stating your medical care preferences and how finances are to be handled. For elder orphans or seniors who are estranged from their family, a power of attorney can prevent a court order guardianship or conservatorship.
Finally, snowbirds are increasingly using narrowly drafted conventional power of attorney documents to designate an individual to manage their affairs while they winter in warmer climates or take extended overseas trips.
In Detail: Financial Power of Attorney
Because a financial power of attorney is such an important document, most jurisdictions have created a standardized form which grants specific powers to the principal’s attorney-in-fact on financial matters. The scope of those powers varies, so it is best to understand the applicable laws before designating a person to act as your financial power of attorney.
A financial power of attorney can be conventional, durable or springing, depending on the wishes of the principal. Based on how the power of attorney document is drafted, the attorney-in-fact will have the authority to:
- Access safe deposit boxes
- Conduct banking transactions
- Conduct personal property transactions
- Conduct real estate transactions
- Handle business operations
- Handle tax matters
- Make gifts to individuals and charities
- Manage government benefits (Social Security, Medicare, unemployment, etc.)
- Manage insurance
- Manage investments
- Manage retirement benefits (pension, 401(k), etc.)
- Manage Property
- Resolve claims and litigation
A financial power of attorney can be an important component of an individual’s financial plan whether they are looking to protect yourself should an unexpected injury or illness occur or simply looking for a trusted individual to conduct business on their behalf in while you are traveling.
In Detail: Healthcare Power of Attorney
A healthcare power of attorney is sometimes referred to as a medical proxy, health care proxy or medical power of attorney. As with other POA documents, healthcare power of attorney can be conventional, durable or springing, based on the desire and needs of the person creating the document.
As the name implies, the healthcare power of attorney enables the attorney-in-fact to make healthcare and end-of-life decisions on behalf of the principal. Typically, healthcare POAs are durable or springing in nature to ensure the attorney-in-fact can make decisions once the principal has become incapacitated. While it is possible to have a conventional healthcare power of attorney, it is generally unwise to do so as this limits the
To make it easy for individuals to designate a healthcare power of attorney, and avoid costly court proceedings, most of the states have developed fill-in-the-blank healthcare power of attorney forms. Often these forms will incorporate a living will, as well.
Whether an individual is seeking to their future by appointing a person to manage their affairs should they become unable to do so, or they are looking to make their extended travel more care-free by allowing someone else to manage your affairs while they are away, a power of attorney can help ensure their finances and medical care are managed in accordance with their wishes.
Having Multiple Agents Named in a Healthcare POA
When creating a power of attorney, it is possible for the principal to designate multiple agents. For healthcare POAs, experts advise that only one agent be designated in the document. Designating multiple agents could lead to disagreements about care resulting in care being delayed or even legal challenges being brought before a court.
The Difference Between Healthcare Power of Attorney and Living Wills
A living will is an important component of an individual’s advance directives. A living will is significantly more focused than a healthcare power of attorney and states what medical treatments the individual would or would not want to be used to keep them alive. The living will may also state the individual’s preferences about pain management and organ donation. Doctors and other caregivers will look to a living will to understand how the individual wishes to be cared for when they are terminally ill, incapacitated due to serious injury, or in the late stages of dementia.
It is important to understand that while a living will prescribes treatment preferences, it does not grant legal authority to make medical decisions.
The Difference Between Healthcare Power of Attorney and Advance Directives
Occasionally, people will use the terms healthcare power of attorney and advance directive interchangeably – this is incorrect. A healthcare power of attorney is one document care providers, and the courts, will look to should conflict over a person’s care arise. Other documents that makeup advance directives include: a living will, do-not-resuscitate (DNR) instructions, organ and tissue donation instructions, and palliative care instructions. It is becoming increasingly common for these instructions to be included as part of a living will. Collectively, these documents are known as advance directives. These documents define a person’s care preferences, but do not grant anyone the authority to make decisions on their behalf.