A power of attorney (POA) is a legal document in which (you) called the Principal, designates another person, called the Agent or an attorney-in fact to act on your behalf to make decisions in specified matters or in all matters. A power of attorney is in effect only as long as the principal is alive and it can only be enacted by a principal who is mentally competent. You may think that once an attorney-in-fact has be appointed you lose control of any decision making and how your assets are used. This is not true… a POA only steps in if you are no longer mentally capable of running your own affairs.
Three Main Roles of a POA (Power of Attorney)
- Making decisions on the behalf of someone who has lost their mental capacity
- Handling legal and financial matters on behalf of the principal
- Making medical decision on behalf of the principal
If the principal has become unable to make decision due to incapacitation the POA can take effect. This can also be called an advanced care directive and it grants authority to make medical decision for the principal. This could be a specific POA for medical decision only.
The healthcare agent can decide
- What medical care the principal receives, including hospital care, surgery, psychiatric treatment, home health care, etc.
- Which doctors and care providers the principal uses.
- Where the principal lives. This includes decisions regarding residential long-term care, such as assisted living, memory care, and nursing homes.
- What the principal eats.
- Who bathes the principal.
The durable financial power of attorney is simply a way to allow someone else to manage your finances in the event that you become incapacitated and are unable to make those decisions yourself. … More precisely, it grants someone legal authority to act on your behalf for financial issues. A financial agent can…
- Access the principal’s financial accounts to pay for health care, housing needs and other bills.
- File taxes on behalf of the principal.
- Make investment decisions on behalf of the principal.
- Collect the principal’s debts.
- Manage the principal’s property.
- Apply for public benefits for the principal, such as Medicaid, veterans benefits, etc.
What An Agent Cannot Do
- Change a principal’s will.
- Break their fiduciary duty to act in the principal’s best interest.
- Make decisions on behalf of the principal after their death.
- Change or transfer POA to someone else. An agent has the right to decline their appointment at any time. However, unless the principal named a co-agent or alternate agent in the same POA document or is still competent to appoint someone else to act on their behalf, an agent cannot choose who takes over their duties.
When creating a power of attorney you can be as specific as you like. You can say the financial POA can only pay bills, buy and sell stocks and bonds, manage real estate or any individual affair you would like to include.
Incapacitation can happen at any time of your life but senior citizens should consider doing a POA before physical deterioration or mental incapacity. A POA completed in time ensures that your personal affairs are attended to when you no longer have the ability to manage them on your own. This can prevent lots of problems from occurring, especially if there has been inadequate estate planning.
Uniform POA Act
Twenty-five states have adopted the Uniform Power of Attorney Act. Created in 2006 by the Uniform Law Commission, this law aims to create universal default rules for POA contracts across states. It determines which powers are included in the document by default, and which must be explicitly addressed in order to be bestowed on an agent.
POA to Professionls
POA’s have also evolved into a useful mechanism that allows individuals to grant authority to professions with specialized skills who can represent them in business, legal and financial arenas that require specific knowledge the individual might not have. This allows people to level the playing field when it comes to dealing with larger institution that have paid professional staff dedicated to acting on their behalf.
It is important to recognize the value of being able to assign these decision capabilities to a trusted family member or friend, especially in the case of durable powers of attorney that continue to be legally binding in cases of incapacity. These documents can save care giving family members and friends a great deal of time and frustration. For this reason, every individual should establish a power of attorney.
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