Most likely you have heard the term Power of Attorney (POA). It is commonly known to refer to a person who can make critical decisions on your behalf in the event you become incapacitated. But, it’s not quite that simple. Assigning POA can be a complicated decision and one that should well-informed.
A frequent misconception is that a pre-designated individual gains POA upon your death and assumes the role of primary decision-maker concerning bank accounts, property, investments and other assets. But, POA is something else. Your POA designee only has power to act as your proxy while you are still alive. After your death, the person acting on your behalf (that you have named previous to your death) may be the co-owner of your business, the Trustee of your Trust or a Personal Representative named in your Will. But, POA dies when you die—immediately and automatically. There are no exceptions.
SETTING UP A POWER OF ATTORNEY
To begin the process of assigning POA, a legal document is created that lists you as the “Principal” and the person you appoint to act for you as your “Agent.” The POA can be either “Immediate” (taking affect upon signing the document) or “Springing” (taking affect on a certain date or at the occurrence of a certain event, such as incapacitation). There are many different responsibilities you can specifically assign to a POA.
HEALTHCARE (HCPOA) & PROPERTY POA
Your Agent is authorized to make healthcare decisions for you when you are unable to make those decisions yourself. These decisions relate to hospitalization, medication, hospice care and other medical necessities. However, the powers created in a HCPOA are not simply combined with other non-healthcare powers. Because of state laws, your attorneys will most likely also prepare a Property POA separate of the HCPOA. The Property POA authorizes decision-making for anything other than healthcare affecting the client’s money (investments, real estate, finances, banking and legal decisions).
SCOPE OF THE POA
For either the HCPOA or the Property POA, the Agent’s authority can be limited or unlimited. For example, an Agent may be authorized to make healthcare decisions only as they related to cancer treatment—this is a “Limited” POA. A “General” HCPOA on the other hand, authorizes the Agent to make any and all decision concerning your healthcare. Likewise, with a Property POA the Agent may have a Limited power to sign legal papers for the sale of one parcel of real estate while you are out of the country, or she may have power to handle all of your business interests listed at the end of the preceding paragraph.
Nearly all POAs are “Durable.” This means the POA is designed to be effective both when you become mentally incapacitated and after you regain your mental capacity – if you do.
A POA is not always needed. If you have a Living Trust that is fully “funded” with your assets, then your Trustee (rather than someone with a Property POA) has the power to deal with your assets while you are alive and after your death.
If you have questions about POA or anything other estate-planning matters, please call me at 801.534.7228.