What is a Power of Attorney? And Do I Need One?
- What is a Power of Attorney? A Power of Attorney is a legal document by which you give someone else the legal capacity to do things for you, in your name, as if you were doing them yourself. The person who gives the power is called the “principal.” The person who gets the power is called the “attorney in fact” or “agent.”
- What can an agent do in my name? An agent can do whatever the Power of Attorney allows. It can be quite limited or very broad. Your agent can handle mundane tasks such as sorting through your mail and depositing your Social Security checks, as well as more complex jobs like watching over your retirement accounts and other investments, or filing your tax returns. If necessary, your agent can hire professionals (paying them out of your assets) to help out.In summary, your agent stands in your shoes and acts on your behalf. However, naming someone your agent in a Power of Attorney does not limit your rights; you can still handle all your matters as your have done in the past; the Power of Attorney simply gives the other person the ability to act when you cannot or when you choose not to act.
- Who should be my agent? Your agent doesn’t have to be a financial expert; just someone you trust completely who has a good dose of common sense. If you think there’s any possibility that a person wants to control your assets for his or her own purposes, don’t make him or her your agent.
- What is a “Durable” Power of Attorney? “Durable” means you name your agent now and your designation remains effective should you become incapacitated.
- What if I want to change my agent after I execute the Power of Attorney? You may revoke a Power of Attorney at any time, by either executing a Revocation or by executing a new Power of Attorney which contains language revoking any power of attorney given to any person executed before the date of execution of the new Power of Attorney. However, you will still be bound by anything your prior agent has done before you revoked him or her. For additional precautionary reasons, you may wish to advise the prior agent and financial or other institutions with which the agent has been doing business on your behalf that you have executed a new Power of Attorney and named a new agent.
- What if I do not execute a Power of Attorney and I become incapacitated? A guardianship is an option when someone has not executed a Power of Attorney. Here, a court declares a person incapacitated and appoints a guardian. The court transfers the responsibility for managing finances, living arrangements, and medical decisions to the guardian. This procedure can take some time. If family members disagree about the need for guardianship or who should act as a guardian, this can be a painful and prolonged process that may leave everyone involved feeling angry, guilty, or both. Additionally, the cost of a guardianship proceeding will cost an individual substantially more than the cost of the preparation of a Power of Attorney.
- If not revoked by the principal, when does a Power of Attorney end? All Powers of Attorney automatically end when the principal dies.
Every adult should designate an agent and execute a Power of Attorney. Disease, dementia, stroke or anything else can cause you to become incapacitated and unable to take care of your financial and other matters. Life is never certain but designating an agent is.
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