You make significant daily decisions regarding your assets, health, finances, and other essential aspects of your life. But what if you found yourself unexpectedly unable to do this? Although we always try to be ready, occasionally unforeseen events such as vehicle accidents or medical diagnoses occur. By creating a durable power of attorney, you may protect yourself from the issues and uncertainty these circumstances bring up.
A power of attorney is a legal document that enables you to give decision-making authority to another person. In general, you can appoint any trustworthy adult as your agent, such as your partner, an older child, an attorney, a parent, or another relative.
If you are thinking of creating durable powers of attorney, you need to know plenty of things. These include:
1. Understand the power you are giving
The law permits the exercise of a durable power of attorney once it has been issued, regardless of the principal’s physical or mental condition. A durable power of attorney lowers the likelihood that a court will appoint a guardian in the case of incapacity.
When you appoint someone to act as your “attorney-in-fact” or agent to make financial, medical, and long-term living choices on your behalf and to do so even if you become incompetent, you establish an agency relationship. The agent must act in your best interest and has several legal privileges and obligations.
A power of attorney typically gives the named agent extensive, practically unrestricted power. You should, therefore, only select someone you have complete faith in. Your agent will have similar authority over your bank accounts, real estate, and other investments that you make to make financial decisions.
2. Understand the various types of power of attorney.
There are various types of powers of attorney that you need to understand before you go ahead and create one. These include:
The limited power of attorney– gives the agent authority for a set period or task. For instance, they could represent the principal in a real estate transaction. They act as the buyer’s agent and have the authority to sign any necessary paperwork. When the transaction is finished, their authority expires. Alternatively, a principal may date a power of attorney when unavailable (for instance, abroad). A power of attorney places a time limit on the authority’s scope.
A springing power of attorney– takes effect when a certain circumstance or occurrence happens. Typically, this occurs when the principal is incapacitated or unable to manage their affairs.
A durable power of attorney– takes effect immediately upon signature unless the principal specifies a different effective date. This power of attorney is “durable” since it continues to be in effect even if the principal becomes incapacitated later. This kind of power of attorney expires upon the principal’s death or revocation.
3. Choose wisely
Although it may seem straightforward, this decision may cause issues for families. Relationships can charge overtime. It’s possible that a person you formerly trusted is no longer important to your life or that their circumstances have altered in a way that prevents them from acting appropriately on your behalf.
You must trust the person you name as your attorney-in-fact or agent. They should ideally be someone who is well-liked by the rest of your family. For instance, don’t select your oldest child unless they are also the family’s most responsible child.
This large obligation necessitates sound financial judgment and meticulousness. You must be certain you are choosing the best candidate for the position. Before making a choice, discuss it with the nominated agent and any other family members it might affect.
4. Abuse is pretty much common.
Depending on the power of attorney’s terms, your agent might have the authority to modify your beneficiary designations or change the ownership of your bank accounts. This situation occurs frequently in second marriages.
The transfer often occurs as the husband is deteriorating in the hospital, right before the spouse dies. For instance, if the husband’s Will names his first marriage’s children as joint owners of some of his sizable bank accounts, the second wife, acting under a power of attorney, may add herself to the account as a joint owner. After the husband passes away, the second spouse, the surviving joint owner, liquidates the account. The bank account does not require probate, and the children never get half of their father’s wealth. It frequently occurs. Siblings frequently use it to keep their siblings or sisters out of their mother’s assets.