Prepare for the unexpected by having someone who can act for you.
Power of Attorney
A Power of Attorney is a legal document through which you appoint an individual (the agent or attorney-in-fact) with the power to act for you (the principal). The agent can have broad legal authority or limited authority to make legal decisions about the principal's property, finances or medical care. A power of attorney is often used when you can't be present to sign necessary legal documents for financial transactions, but can also be written to allow your agent longer-term authority.
When do I need a Power of Attorney?
Financial transactions. If you need to sign a contract or complete a deal but cannot be there in person, you can appoint an agent to act in your stead.
Potentially risky situations. When traveling internationally or becoming involved in a higher risk situation, it may be advisable to have a power of attorney drafted.
Proactive protection. A power of attorney is only effective if drafted while if full possession of your faculties. It is often said that, when you need a power of attorney, it is already too late.
What other factors should be considered?
Great power. Once someone has been given Power of Attorney, any authorized actions that they take in your name are legally binding. It is important that you only give power of attorney to someone that you trust implicitly. You should also carefully consider what authority to grant an agent.
Timing. Power of Attorney can be limited or general, and can be durable or temporary. A Power of Attorney that is only effective when certain conditions occur is called a springing power of attorney.
Presentation. It is highly advisable that you present a Power of Attorney to the likely institutions where it would be used to facilitate its acceptance. Financial institutions are generally careful when accepting Powers of Attorney, as they can cause significant complications if incorrectly approved.
Why is a Power of Attorney important?
A Power of Attorney can be incredibly important in protecting your financial and real estate interests. If you are incapacitated and have no agent designated, your family may encounter costly and time-consuming delays.
Because a Power of Attorney has to be established by the individual, a family cannot obtain Power of Attorney when they suddenly realize that an elderly relative is no longer able to manage their affairs. A court would have to appoint a guardian in that situation, rather than allowing the individual to decide their own representative.
What is the difference a Power of Attorney and a Will?
The main difference between these two documents is when they are in effect. A Power of Attorney is only in effect while you are alive. It effectively allows someone else to act in your name, but once you have passed away, this is no longer possible.
A Will, on the other hand, only comes into play once you have passed away. Nothing in the Will has legal effect until that point.
