Power of Attorney

What is a power of attorney?

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Give your agent executive power over all matters, or limit it to a few areas.

A power of attorney is a legal document that gives power to another person to make decisions on your behalf. You’re known as the principal, and the designated person is your agent or attorney-in-fact.

Different types of powers of attorney can be used for specific purposes and guidelines can be set on what is and isn’t allowed.

What’s the use of a power of attorney?

Several situations may come up where a power of attorney can be extremely useful, including:

  • Closing important business deals. As a business owner, you may be offered a very lucrative business deal that needs to be signed at a specific location and on a specific date. Having a person to act as your agent allows those documents to be legally signed on your behalf without being present.
  • Elderly people managing their finances. Finances can become more difficult — or tedious — with age. Making a trusted person your agent can help ease the burden. And because guidelines can be written in, absolute control doesn’t have to be given up.
  • Making critical medical decisions. A serious accident can render you unable to make vital medical decisions. Providing your wishes to a trusted person and making them your agent is a way to maintain control over what happens, even when you’re unconscious.

Many other situations may merit a power of attorney. It can be used to close property deals on your behalf, appear for important court matters, sign and release paychecks in your absence or for any other specific purpose the power of attorney was created for.

Who can I choose as an agent?

The attorney in power of attorney isn’t necessarily a lawyer or an advocate. They can be any trusted person who’s chosen to as an attorney-in-fact on your behalf. You can also have more than one agent.

Often, a trusted relative, business associate or friend may be chosen to act as an agent for important health, business and financial matters among others. You may also opt for an actual lawyer or accountant to act as your agent.

Different states have different laws around power of attorney, but all require the agent to be at least 18 or older. This may go without saying, but the agent must also not be incapacitated.

However, since you’ll be bestowing very important powers on your agent or agents, it’s necessary to keep some vital points in mind when choosing an attorney-in-fact.

  • Choose an honest and trustworthy person. Your attorney can be authorized to make important decisions on your behalf, and may be allowed to handle your financial matters. It’s absolutely vital that you choose a person who won’t take advantage of you.
  • Integrity is more important than know-how. Appointing people who will act in your best interests is often more important than choosing someone based on how much they know about what they have power of attorney over.

What are the types of power of attorney?

You can choose from four types of power of attorney when designating an agent. The laws around each type differ by state, but there are some basics that apply to each.

Springing a power of attorney

Many different kinds of conditions may be set up to spring the power of attorney. It can be the principal turning a certain age or being incapacitated, or a specified date being reached.

How does it work with more than one agent?

You can appoint several different agents to act on your behalf. Not all of the agents are required to have the same control. For example, one could be able to act on your behalf immediately for financial matters, where another one springs into effect if a medical emergency happens.

When two or more people are appointed agents for the same matters, they must make decisions according to your specifications. The two main options are:

  • Joint. Any documents must be signed by all agents in a joint situation.
  • Independent. Any of the appointed agents have the authority to sign on your behalf.

Keep in mind that regulations around appointing agents differs by state. If you’re unclear on what is allowed, contact a legal professional for advice.

Bottom line

A power of attorney can be a useful tool now and later in life, depending on your needs. Business, financial and medical documents and decisions that you wouldn’t otherwise be able to sign or make can be quickly and easily taken care of — just make sure you appoint someone who’s trustworthy as part of your estate planning.

And if you’re worried about what financial legacy you may leave behind, make sure to read our guide on life insurance.

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