It’s hard to think about the possibility of no longer being able to make financial decisions. Nobody wants to imagine they will become incapacitated.
However, whether it’s because of old age, health or a combination of both, there is no way of guaranteeing you will always be capable of making your own decisions. This is why it so important to designate a trusted individual power of attorney (POA).
What is a Power of Attorney?
A power of attorney allows you to appoint an individual to act on your behalf should you no longer be able to. This person can make important financial decisions, including managing your bank account, taxes and real estate.
Who to Select?
The most important factor in choosing a POA is trust. Many people choose a family member, such as a sibling or adult child. Some people also choose a close friend.
It is important to keep in mind the power this person will have over your life, so you want to choose someone you trust implicitly.
Types of Power of Attorney
There are several different types of power of attorneys. You’ll want to review your options with a lawyer who can help you choose what is best for you depending on your needs.
- Specific powers of attorney limit your agent to handling only certain tasks, like paying bills or selling a house, and generally on a temporary basis.
- General powers of attorney give your agent broad authority. They can step into your shoes and handle all your legal and financial affairs. With these documents, that authority can end at the time you become incapacitated.
- Durable powers of attorney may be limited or give your agent broad authority to handle all your legal and financial affairs, but your agent keeps the authority even if you become physically or mentally incapacitated. This means that your family may not have to ask for a court to intervene if you have a medical crisis or have severe cognitive decline such as late-stage dementia.
Sometimes, medical decision-making is included in a durable power of attorney for health care. This may be addressed in a separate document that is solely for health care, like a health care surrogate designation.
Again, we can’t stress enough how important trust is when selecting a POA. As you are going through the process, you should take stock of your finances and assets and determine who will best represent your interests and wishes.
It’s also important to know it is never too soon to start thinking about a POA. Even if you are young and healthy, being prepared can help you avoid issues. If you are older, health issues can come on suddenly and you’ll want to have a plan in place.