What Is a Power of Attorney (POA)?

Estate planning is a common way to plan for your future. One of the main components of estate planning is the power of attorney. Here is what you need to know about power of attorney.

What Is the Power of Attorney?

Power of attorney is a legal document that gives power to another person, known as the attorney-in-fact or agent, to do specific things on behalf of another individual, the principal. The agent can act independently and use their judgment to make specific decisions, such as financial, legal, or healthcare, as per the contents of the document. A power of attorney enables the agent to represent and act for the principal.

Who Should Be Your Agent?

When choosing an agent for a power of attorney, selecting someone trustworthy, reliable, and capable of carrying out the responsibilities effectively is crucial. The agent should understand your wishes, values, and priorities.

Ideally, choose a person who is close to you and has a good understanding of your personal and financial affairs. This could be a family member, a close friend, or a professional advisor such as an attorney or an accountant. 

Have open and honest communication with your potential agent to ensure they are willing to take on the role and have the time, skills, and willingness to act in your best interests. 

Consider someone who can make sound decisions, handle financial matters responsibly, and effectively communicate with other relevant parties, such as healthcare providers or financial institutions. You can also choose an alternate agent in case the primary agent is unable or unwilling to fulfill their duties in the future.

What Are the Types of Attorneys?

There are different types of power of attorney. 

General Power of Attorney

A general power of attorney grants wide ranging duties to the agent, allowing them to act on your behalf in various matters. The directive typically covers financial, legal, and business transactions. The agent can make decisions and carry out actions such as managing bank accounts, signing contracts, or handling real estate transactions.

Limited Power of Attorney

A limited power of attorney—also known as a specific power of attorney—grants the agent authority for a specific purpose or within a limited scope. The directive is often used when the principal needs assistance with a particular task or transaction. For example, if the principal can't conclude a property sale transaction, they can grant a limited power of attorney to their agent to sign the necessary documents on their behalf.

Durable Power of Attorney

A durable power of attorney remains effective even if you are incapacitated or lose the ability to make decisions. This type of power of attorney ensures that the agent can continue acting on behalf of the principal in crucial matters. It is commonly used to handle financial and healthcare decisions during the principal's incapacity.

Springing Power of Attorney

A springing power of attorney becomes effective only when a specific event or condition occurs. For instance, it may come into effect when a medical professional certifies the principal's incapacity. Until the specified triggering event occurs, the agent's authority remains dormant.

Medical Power of Attorney

A medical power of attorney—also known as a healthcare power of attorney or healthcare proxy—grants the agent the authority to make medical decisions on behalf of the principal. The power comes into effect when the principal is unable to make medical choices or communicate their wishes. The agent acts as an advocate for the principal's healthcare preferences, ensuring their medical treatment aligns with their desires and values.

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