Why do I need a power of attorney?
The biggest reason to have a power of attorney (PoA) is to avoid the need for a court-ordered guardianship. A court-ordered guardianship occurs in the event that you suddenly become incapacitated due to an accident or illness. Guardianships can be difficult to work, time consuming and expensive for everyone involved. So having a power of attorney created while also having a will created makes sense.
What is a power of attorney?
A PoA authorizes someone you trust completely to act as your agent in making financial decisions for you. This is usually done in the event you are not able to do so yourself. (for medical decisions see Medical Power of Attorney) A power of attorney typically becomes effective the day that you sign it. And it remains in effect until your death unless you revoke it before then (see further below). If you want it to expire on a specific date you can include an expiration date in the document. However, do not do this if you want your agent to be able to make financial decisions for you if you were to become disabled or incapacitated some unforeseeable time in the future. Likewise, you could create a “springing” power of attorney that becomes effective only after you become disabled or incapacitated.
Do I need to notarize a power of attorney and file it at the courthouse?
You need to notarize it for it to be valid, but you do not need witnesses to sign it. You must record it at the courthouse only if you want the agent to act on your behalf in a real estate transaction. However, even if there is no need for your agent to have this particular power when it comes to real estate, it is still a good idea to record the document at the courthouse. Because a recorded power of attorney may hold more authority in the eyes of some financial institutions.
Other than for estate planning purposes, are there other reasons for creating a power of attorney?
Some people use PoA’s strictly for the sake of convenience. For example, you might want someone to perform banking transactions for you while you are away on a long trip.
Can I create a PoA that only pertains to particular kinds of financial decisions for me?
A PoA can identify and limit the authority of the person designated to act on your behalf. When these powers are limited to certain actions the document is sometimes called a special power of attorney. Some examples of specific powers to grant are for real property transactions, business operating transactions, personal and family maintenance, social security benefits, and tax matters. You can likewise include special instructions limiting or extending the powers you grant to your agent. For example, someone could limit the agent’s powers to only being able to make decisions about a particular personal bank account. Or maybe the agent should only make decisions about a particular business.
How can I revoke a power of attorney?
If you decide you want to terminate the document, you must specifically revoke that power via another document called a revocation of power of attorney.
What is the difference between a power of attorney and a medical power of attorney?
A PoA authorizes someone you trust to act as your agent in making financial decisions for you in the event you are not able to do so yourself. A medical power of attorney authorizes someone you trust to make medical decisions for you in the event you were to become ill and could not communicate with your doctor.
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