Most people are aware of the fact that a power of attorney is a legal device that can be used to allow someone else to act for you in a legally binding manner. The person that gives the power is called the grantor or principal, and the term for the proxy is “attorney-in-fact” or agent.
There are general powers of attorney, and limited powers of attorney. If you execute a general power of attorney, the agent or attorney-in-fact would have sweeping powers to act as your representative. In a very real sense, the individual would be able to do anything that you could do for yourself, so this is a very big step to take.
With a limited power of attorney, you can give someone the legal right to act on your behalf in a measured manner. For example, you could give the agent the ability to act for you while you are recovering from a serious accident. It is also possible to give someone a power of attorney to take care of a single action.
For example, let’s say that you have been in China on business for several months. You made an offer on a vacation home in Key West, which is where your sister lives, and it has been accepted. Closing papers must be signed, so you could execute a limited power of attorney giving your sister the ability to act on your behalf to consummate this single transaction.
These are a couple of different examples, but there are other reasons why someone may want to execute a limited power of attorney.
Prepare for End of Life Eventualities
Now that you understand the basic framework, we can get to the point. When you are planning your estate, you address the matters that will be resolved after your passing. At the same time, you should address end of life issues. For instance, what if you have a mental incapacity and need assistance handling daily affairs?
The Alzheimer’s Association does great work educating the public about this horrible disease. Everyone is aware of the existence of Alzheimer’s, but it is surprising to find out how common it actually is among our nation’s elderly. According to the Alzheimer’s Association website, approximately 4 out of every 10 people that are 85 years of age or older have contracted the disease.
This is definitely an attention-getting statistic. People with Alzheimer’s disease are typically going to become unable to make sound decisions at some point in time. And of course, Alzheimer’s is not the only cause of incapacity among elders.
To respond to this reality, your estate plan should include incapacity planning documents called durable powers of attorney.
A standard power of attorney that is not durable would not remain in effect if you were to become incapacitated. However, a durable POA would be active, and this is why they are used for incapacity planning purposes.
There are medical decisions that may present themselves, and someone should be empowered to handle your financial affairs. You can execute an advance directive, and you can add a durable financial power of attorney.
The same person can act as the agent for both forms of decision-making, but you have the right to name different agents for each respective power of attorney if this is your choice.
Learn More About Estate Planning!
If you would like to learn more about important subjects like this one, there are some great learning opportunities coming up over the horizon. We are offering some free seminars, and we urge you to attend the session that fits into your schedule. To get all the details, visit our seminar schedule page.
- Planning for the “Silver Tsunami” - November 1, 2022
- Discharge of Indebtedness Income and Student Loan Forgiveness - October 27, 2022
- More than Just Salad Dressing: The Ongoing Saga of Newman’s Own Foundation - October 25, 2022