What Is A Power Of Attorney
What Is A Power of Attorney
A power of attorney (POA) is a document wherein one person (called the principal) gives another person (usually called the agent) the legal authority or power to make decisions for and act on behalf of the principal.
In some states, the “agent” may also be referred to as an “attorney-in-fact”. The most common purpose for a power of attorney is for the management of the principal’s assets and other financial and business matters in case of specific circumstances. With a power of attorney, the legal title to the assets being managed by the agent will remain with the principal.
A Power of Attorney should be part of your estate plan. They both will help you design and plan how you will pass on the assets you have acquired through your lifetime to your family and/or other beneficiaries.
The purpose of estate planning is to protect your assets and align what happens after your death with your goals in terms of leaving your legacy.
What Does A Power Of Attorney Cover?
The powers in a power of attorney (POA) document that are granted to the agent can either be very broad or very limited.
A broad power of attorney, otherwise known as a general or comprehensive power of attorney, covers all types of transactions and allows the agent to do everything that the principal is also allowed to do.
This is especially helpful in carrying out business transactions i.e. transactions like accessing bank accounts or selling properties.
A broad power of attorney is appropriate when the principal has decided to grant substantial powers to another person that he or she trusts completely, such as a spouse or child, if the principal is incapacitated such as in the case of total or permanent disability.
A limited power of attorney, on the other hand, is written to carry out very specific personal, financial, or business transactions only.
For example, a person who lives in one country and wants to sell his or her house in another country may grant a power of attorney to another person (i.e. a family member, a friend, or a professional real estate agent or lawyer) in the country where the property is located to facilitate the sale.
This type of power of attorney will specify the transactions that the agent will be allowed to conduct in terms of the real property sale.
Effectivity and Duration of a Power of Attorney
The power of attorney, depending on the agreement, can take effect immediately or in some cases only in the event of the principal’s incapacity. But in general, this powerful document is effective upon its execution or signing.
In other instances, it can also be written to only take effect when a future unforeseeable event happens. For instance, a principal may choose to execute a power of attorney effective only when he or she becomes disabled or mentally incapable of handling his or her usual business affairs.
The power of attorney is a useful and potentially dangerous legal tool. It usually ceases to be enforced when the principal explicitly amends the stipulations, revokes them entirely, or when the principal passes away.
Benefits of Having a Power Of Attorney
There are many advantages to being able to appoint your own agent via a power of attorney.
Planning for the future and executing a power of attorney will give you the peace of mind and opportunity to lay out and specify how you want your finances handled and distributed. In this way, if you ever become disabled or incapacitated, you will not have to worry because your appointed agent will take care of your business affairs. In the absence of such authorization, however, a judge will make the important decisions for you instead through a legal proceeding.
Another benefit to having a power of attorney is the protection that it will give you. This legal document normally specifies the transactions you are giving consent to be carried out by our agent. Therefore an agent will not be able to legally conduct any affairs or take any actions that you have not authorized. This means, you will also need to execute a trust, will, or other estate planning tool to accomplish your wealth distribution goals and to ensure that your estate is managed as you wish after your death.
In a power of attorney, you still have control over your affairs. It does not require you to give up all of your rights in managing your financial and business affairs, at all. Your agent will only be allowed to take actions at your specification and discretion, as per the document. You also have the right to revoke the validity of the power of attorney at any point in time.
A power of attorney is an efficient tool when it comes to estate planning and executing a trust. It is important however to understand what trust and estate planning is, the various components of a complete estate plan, and what advantages it offers for you and your family.
Andrea Aston, Attorney at Law, can help you understand your options, in an easy and stress-free approach, and provide you the peace of mind an estate plan can provide.
Whether you require a general or limited power of attorney, Andrea Aston can guide you through the estate planning process working with you and your needs, and come up with the right plan for you.
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