Struggling with money issues or big medical decisions can happen to all of us. Aging, illness, or other factors can contribute to the difficulty. You can get help, though, through a legal document known as a power of attorney.
In a power of attorney, you sign a document stating that another person whom you trust, known as the agent or attorney-in-fact, has the power to act on your behalf to make certain decisions. Your power of attorney could limit this person to making only financial decisions on your behalf. But you can make the document broader, giving your agent the power to make a wide variety of decisions, including choices about medical care, or decisions regarding where you live, and when it’s time to sell your home.
When You Need One
In most cases, it is elderly people in their retirement years who choose to enact a power of attorney. This is especially true for elderly people who are struggling with memory issues or other illnesses that make it more difficult for them to keep track of their finances.
You might not think you need a power of attorney if you are married. After all, even if you can no longer handle the tasks of paying your bills on time, your spouse can withdraw funds from your joint bank accounts to make sure that your mortgage company, auto-financing company, or utility company are paid on time each month.
But there are other financial decisions that can be complicated even for married couples. For instance, it might make sense to sell your home. But in many states, both spouses must agree to a home sale. If one spouse is incapacitated and unable to make this decision, the other spouse might not be able to put the home on the market.
Also, your spouse will have no legal authority to make decisions regarding accounts or property owned solely by you. A power of attorney, though, can guarantee that important financial or property matters are handled by someone whom you trust.
Different Types of Contracts
There are several different types of power of authority contracts. What is known as a durable power of attorney might be the most powerful. This type of power of attorney remains in effect for your entire lifetime. This gives the agent free reign to manage your accounts on your behalf for as long as you are alive.
Because a durable power of attorney lasts the rest of your life, though, you need to be clear about what you want it to say. If you want your agent, for instance, to only be able to make decisions regarding your home and its sale, spell that out in the power of attorney document. If you want your agent to have broader control over both your finances and your medical decisions, spell that out, too.
A conventional power of attorney goes into effect when the document is signed and ends when that person becomes incapacitated.
You can also create a springing power of attorney. This type goes into effect when a specific event takes place. In most cases, a springing power of attorney will become effective when you become mentally unfit to handle financial, medical, or property decisions.
The challenge often lies in determining when this specific event has actually taken place.
Creating a power of attorney is a big decision, and one that you should only make after meeting with loved ones and legal professionals. Remember, you are signing over your right to make your own financial, property, or medical decisions.
Keep in mind your spouse, too. Your spouse can continue to make decisions on your behalf even after you have signed a power of attorney. But once your spouse becomes incapacitated, the agent you named in your power of attorney will take over.
Deciding who will serve as your agent is the big decision here. You can choose a family member, your spouse, a friend, or another loved one. The key is to find someone you both trust and who is willing and able to take on this responsibility.
Have you considered granting power of attorney? Has someone given you this responsibility?