A power of attorney (POA) is a written document giving another person—usually a spouse or other family member—the authority to handle your affairs when you are not able to do so. This allows the designated individual to make decisions on your behalf if a doctor finds you incapacitated. Sometimes, you can choose to appoint more than one individual. If you choose to do this, you can authorize the multiple agents to act separately or together.
The principal (the person seeking to designate a power of attorney) decides how much responsibility to give to the agent (the appointed individual). These responsibilities can include the ability to access bank accounts, sell stocks, manage real estate, sign income tax returns, and many other things. Or, powers can be limited to a single transaction. The principal also decides when these powers begin and when they end.
Types of Powers of Attorney
A power of attorney comes in three different types: conventional, springing, and durable. A principal is the person who is designating another individual to make medical and financial decisions on his or her behalf. When this power goes into effect depends on the power of attorney type you choose.
Conventional power of attorney: This type begins when the principal signs it and ends when that individual becomes mentally incapacitated.
Springing power of attorney: A springing power of attorney goes into effect only when a specified event occurs, such as when the principal becomes incapacitated. It is especially important that an estate planning attorney assist you in drafting this particular type in order to prevent any difficulty in determining the exact moment when the power of attorney will take effect.
Durable power of attorney: This type of power of attorney goes into effect when a document is signed and, unless he or she cancels it, remains in effect throughout the principal’s life. Compare this to the conventional power of attorney which becomes invalid when the principal becomes mentally incompetent. With a durable POA, no one has to worry about determining when it will become effective, as you have to worry about with the springing POA.
Why Power of Attorney Matters
The power of attorney usually saves your family from going to court. Without a power of attorney or guardian, even a spouse or family member will not be able to act on your behalf in most situations. Having a power of attorney can help avoid confusion when emergencies occur and swift action needs to be taken.