A Power of Attorney (POA) is a legal document that authorizes someone to make decisions about your finances, property and medical care. It is used in situations when you can’t be physically present to sign legal documents, or become too ill or disabled to manage your own affairs.
You can control the scope of your Power of Attorney, and the situations when it can be applied. In this article, we’ll talk about:
A power of attorney grants a person (called the agent) the power to act for another person (called the principal). There are different kinds, depending on the tasks you want the agent to take on.
This gives the agent broad authorization to perform almost any number of tasks in your behalf. This includes financial decisions like managing your investments, business decisions like signing contracts, and medical decisions.
This limits the scope and responsibilities of your agent. For example, you can give your spouse or your child a special POA to make your medical decisions. You can also give your business partner another POA to sign contracts or checks if you can’t be physically present.
You can specify the duration of your Special POA. For example, if you will be out of the country because of work or military service, you can assign someone to manage your affairs only for the period that you will be away.
Special POA can also be assigned for a single transaction, such as handling the sale of a property.
This states that the POA remains in effect even when you become physically or mentally incapacitated. Both general and special POAs can be made durable.
However, any POA is cancelled or nullified after your death. Your Last Will and Testament identifies the distribution of your estate, and can’t be superseded by your agent.
In a Springing Power of Attorney, you retain full control over your financial and medical affairs until you are medically incapacitated. A doctor will need to issue a certification that you are unable to make decisions.
It’s important to note that your agent’s authority is only in place while you are unable to make decisions for yourself. If you regain consciousness or are deemed medically able to make informed decisions, the Springing POA will be revoked.
It may be uncomfortable to think about someone else making decisions for you, especially if you’re used to taking charge. However, planning ahead actually gives you more control over what will happen to your assets in case of illness or death.
You are able to identify the people who can best manage your assets, or make healthcare decisions that reflect your values, interests and what you want for your family.
Without a Power of Attorney, it may be necessary for the court to appoint a guardianship or a conservatorship. This not only incurs expensive legal fees, but you will not be sure if the person assigned will best represent your interests.
What do you want to happen if you are in a situation that requires life support or a high-risk surgery?
Without planning, your relatives are forced to make this painful decision for you, often with great guilt. You can appoint a Power of Attorney and provide him or her with your advance directive (ex: use of machine intervention, organ/tissue donation, etc.)
Some conversations are difficult, but necessary. When you appoint a Power of Attorney, you have a chance to sit down with family members (specifically the person you have named as your agent) to explain what you want, and why.
This helps lays down your wishes and expectations, and prevents any conflict over who should take the lead, and what decisions should be made. They know that they are simply complying with what you wanted.
A Power of Attorney plays a big role in asset protection planning. For example, bank accounts or properties can be transferred to your partner or children to avoid taxes that would be incurred if these were released after death.
Aside from these “big” decisions, your agent is also empowered to talk to your accountants or lawyers, pay bills or handle banking transactions, apply for government benefits, or even vote in your behalf.
That is why it’s recommended for seniors to appoint a Power of Attorney. Even if you are healthy and strong for your age, there are some types of transactions that you may want your spouse or children to handle for you.
Most people will choose their partner, child, or a close friend or relative to hold Power of Attorney. However, bear in mind that the best agent isn’t the person who’s closest to you, but the person who can best represent your wishes. Use this criteria:
Considering this criteria, your immediate family may not make a good Power of Attorney because they will be too emotionally involved to calmly and confidently execute your decisions at a difficult time.
That is why some people will get a lawyer, financial consultant or a responsible friend to step into the role when needed.
A Power of Attorney is an important part of any financial planning. You worked hard to build your assets and create the life you wanted, so it’s only right to protect your best interests even in a situation when you are physically or mentally incapacitated.
If you want to find out ore about how to build and protect your investments and insurance, contact Sim Gakhar—we’ll be happy to help.
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When it comes to life insurance there really is no time that is too soon to get covered. And, this is because the younger you are, the cheaper those premiums are going to be. Not only this, but you are probably healthy right now.
If you wait until something bad happens, you will not only without a doubt face higher premiums, but you might not even be able to get covered at all.
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