There are many reasons someone might need to choose a power of attorney (POA), so understanding the term, what it involves, and when you might need it is in your best interests.

In this article, we’re going to examine the meaning of power of attorney, look at the different types, including springing and durable power of attorney, and list some factors you should consider when choosing a POA. Take a look below to find out more now.

What Is Power of Attorney?

Power of attorney is a legal authorization that one person (the principal) gives to another (the agent). It gives the agent powers to act on behalf of the principal, including the authority to make decisions regarding property, finances, investments, and medical care. The authority given may be broad or limited depending on the kind of POA.

Types of Power of Attorney

There are two main types of POAs, including financial POAs and healthcare POAs. Below, we have examined the two, as well as the subtypes of financial POAs.

Health care power of attorney (HCPOA)

Sometimes referred to as a health care proxy, the POA in this case is obligated to oversee all medical decisions on behalf of the principal. POA kicks in in these cases when the principal can no longer make their own healthcare decisions.

Financial power of attorney

This kind of POA allows an agent to manage all the financial affairs of the principal. This could include but is not limited to signing checks, filing tax returns, and managing investment accounts. The agent is required to carry out all acts to the best of the principal’s wishes.

Financial POA is split into a few different types including:

• General Power POA: This kind of POA allows an agent to act on behalf of the principal in any and all matters as allowed by individual state laws. This means they can handle bank accounts, sign checks, manage assets, and more.
• Limited POA: This means the agent may only act on behalf of the principal in specific events. It could refer to a specific time period or specific aspects of the principal’s finances.
• Durable POA: This type of POA usually remains in effect until it is revoked or the principal dies. It is often used for declining cognitive ability or illness.

 

It is important to note the specific rules pertaining to power of attorney will differ by state. For full guidelines, be sure to check out local laws regarding power of attorney. 

When to Choose a Power of Attorney

Choosing a power of attorney may be required at various times during your life. For financial decisions where you are not physically present to make the decision, POA can be planned. As you age, you may consider choosing someone in case of mental decline.

If you have a serious medical condition or progressive illness, you may also consider choosing a power of attorney. It is important that you still have the mental capacity to do so when you choose your POA.

Who to Choose and Factors to Consider

You can choose almost anyone to be your power of attorney as long as they are older than 18 years. You can choose a professional, like an accountant, attorney, or banker. However, they may charge professional fees.

Many people choose a family member, often a spouse or child, to keep the matters in the family and avoid paying hefty fees. 

You should always choose someone that you trust. In the case of a medical POA, their decisions can be life or death to you, so you want someone you trust wholeheartedly. In addition, you should be able to trust that they will act in your best interest, whether an HPOA or a financial POA.

You also need someone capable, both mentally and physically, to serve as your POA. They will be making legal or medical decisions regarding you, and if they get them wrong, you may pay the consequences.

More than one agent may be named, and they can act jointly or separately, so if you have two adult children you would like to name, you can give power of attorney to both. In these instances, it can be convenient for decision-making, as if one agent is not available, the other can still make decisions on your behalf.

However, if you are planning on naming two POAs, you should choose people that you think can agree and negotiate. While choosing two people can be convenient, if they argue and cannot make decisions, they may end up blocking accounts and making things much more difficult.

Final Thoughts

Power of attorney is a difficult decision and you should go with your gut. There are many different forms of power of attorney with differing levels of authority. Keep in mind that the person you choose will have access to lots of your personal finances, so they need to be capable and trustworthy, but by considering the above factors, you can make a decision that’s best for you and your family. 

Author Bio: 

Susan Noel is an experienced content writer. She is associated with many renowned business and law blogs as a guest author where she shares her valuable articles with the audience.