What is a Power of Attorney (POA)?

A Power of Attorney (POA) is a legal document that allows you to appoint another person to act on your behalf concerning finance, real estate, business, and more.  The person that you appoint is called your agent or attorney-in-fact.  You can give your appointed agent limited or broad management powers.  

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A traditional Power of Attorney will terminate upon your disability or death.  A durable Power of Attorney will continue during incapacity to continue the financial management of your estate.  A durable Power of Attorney terminates upon death.

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Why Do I Need a Power of Attorney?

In the event of unforeseen circumstances,  it is critical to have a POA.   if you were to become ill or were involved in a serious accident, having a Durable Power of Attorney in place will allow your attorney-in-fact to manage your affairs until you are better.

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There are many other reasons why you should have a POA, including:

• You travel out of the country often

• You work in a hazardous environment

• You are diagnosed with a severe illness.

• You want a specific person to be responsible for your affairs

• You have a business or property that needs maintenance when you’re unavailable

• You are approaching old age and would like to designate a representative for yourself

• You have children who would need to be provided for if you were to become incapacitated

• You want a specific person to uphold your rules about how you run your business, property, or life

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What Powers Can You Grant To Your Power of Attorney?

Not all Power of Attorney documents grant the same level of power. You can grant your representative the ability to act in any or all of the following areas:

• Finance: You can give your attorney-in-fact the power to make financial decisions, like making payments or closing your accounts, in your absence. Your attorney-in-fact can also hold other financial powers, including the ability to control your bank account, cash checks, or transfer funds. This kind of POA is commonly called a Financial Power of Attorney.

• Legal: A Power of Attorney can allow your attorney-in-fact to handle your legal matters. This ability means they can commence lawsuits, communicate with your lawyer, file documents with the court, and more.

• Real estate: Your attorney-in-fact can handle all of your real estate responsibilities. This ability includes selling, renting, or managing any personal, residential, and commercial properties owned or leased in your name.

• Business: Your attorney-in-fact can manage your business, including making employment, budgetary, and investment decisions on your behalf. They can also be your proxy in meetings and vote as a shareholder in your absence.

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A Power of Attorney can also give your attorney-in-fact other powers, such as:

• Maintaining your family (e.g., paying for your children’s tuition or medical expenses)

• Hiring professionals (e.g., hiring a maintenance specialist)

• Handling government tax requirements and benefits (e.g., filing and paying your personal or corporate taxes)

• Selling, purchasing, or exchanging goods (e.g., selling your furniture or buying new furniture)

• Donating to charities

• Gifting money or items to family and friends

• Making insurance-related transactions (e.g., canceling your home or apartment insurance)

• Managing assets in a Living Trust, an estate planning tool that allows you to transfer assets without going through probate

• Changing retirement plans and accepting benefits (e.g., using your pension to pay bills like your mortgage)

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How Should I Choose A Power of Attorney?

To choose an attorney-in-fact, you must consider your options carefully. Aside from your personal preferences, there are also legal requirements for whom you select.

Your attorney-in-fact may not:

• Be under the age of majority in your state

• Currently be in a state of bankruptcy

• Be the owner or employee of a care home where the principal resides or receives treatment

You can name more than one attorney-in-fact if you believe that different people will better handle certain decisions or transactions.

You may also name a fiduciary, such as an accountant, lawyer, or other professional as your attorney-in-fact if you wish.

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What Are The Different Types of Power of Attorney?

There are two main kinds of Power of Attorney documents:   an ordinary POA and a durable POA.

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Ordinary Power of Attorney

An Ordinary Power of Attorney is valid as long as the principal is competent (meaning they’re capable of making their own decisions and not incapacitated).

Durable Power of Attorney (DPOA)

A Durable Power of Attorney is valid regardless of whether you, the principal, are competent. This means it will remain in effect even if you become incapacitated.  A Durable Power of Attorney remains in effect until you revoke it or die.

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All Power of Attorney documents are either Ordinary or Durable.  However, there are also three different terms that describe how and when the Power of Attorney can be used:

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General Power of Attorney

A General Power of Attorney gives an attorney-in-fact the authority to make any of your decisions regarding finances and property.

Specific Power of Attorney

A Specific Power of Attorney provides an attorney-in-fact with the control to make decisions for a particular purpose (e.g., buying or selling a piece of property).

Springing Power of Attorney

A Springing Power of Attorney means the principal chooses when their Power of Attorney (either Ordinary or Durable) comes into effect, usually on a specific date or when you become incapacitated. For a Power of Attorney to come into effect after you become incapacitated, it must be Durable.

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Choosing a General or Specific Power of Attorney may depend on:

• Who you choose as your attorney-in-fact: For example, if you choose someone who isn’t good at managing finances, you may want to restrict their powers with a Specific Power of Attorney.

• Why you are signing a Power of Attorney: For instance, if you require one particular decision to be made and nothing else, you may want to restrict your attorney-in-fact with a Specific Power of Attorney so they can only act regarding that one matter.