It’s sad but true: estate planning continues to be a major form of personal protection that Americans overlook. When it comes to power of attorney specifically, just over half of all U.S. adults have one in place.
Though it’s tempting to plug our ears and hope we’ll live forever, the truth is that a power of attorney is a critical document to create. With it, you can protect your medical and financial well-being in case the unexpected happens.
However, these documents aren’t always as straightforward as they appear, and it’s easy to get lost in the nuances of different types of power of attorney. Let’s take a look at the importance of these legal documents, as well as what to know about your options.
What Does Power of Attorney Mean?
Before we consider the different options, let’s take a look at the basic power of attorney meaning.
A power of attorney is a legal document that allows a specific person, called an agent, to act on your behalf. This can be critical in cases of incapacitation or illness, especially when these conditions are unexpected.
Without a power of attorney, your loved ones might have to struggle through extensive legal proceedings to appoint a guardian for you. This is why it’s always a good idea to set out a power of attorney well in advance. Fortunately, the process is easy, private, and affordable with the help of a lawyer.
Depending on the type of document, your agent may be able to make legal, medical, or financial decisions for you. They may be able to do so for a short period, or they may be able to do so until your death. The document may become active right away, or it may be triggered by a specific event.
Below, we’ll take a look at the major differences between the most common power of attorney options.
What Are the Types of Power of Attorney?
It’s important to keep in mind that there are several different types of power of attorney to fit different needs. Choosing well can help ensure that you have the right kind of protection in the event of an emergency.
General Power of Attorney
As the name suggests, a general power of attorney arrangement gives your agent the ability to make decisions on your behalf in a range of situations. They may decide the outcome of everything from your personal finances to your legal decisions. With this option, you’re giving away extensive control over your affairs, so you must choose your agent wisely.
Limited Power of Attorney
In contrast to the option above, this agreement gives a specific agent the ability to act on your behalf for a limited purpose. For example, you might sign a limited power of attorney agreement to allow someone to cash checks for you, or to sell your home on your behalf.
Durable Power of Attorney
Abbreviated DPOA, can be general or limited in scope. You may also choose whether you want your DPOA to be immediate or springing. An immediate DPOA becomes effective as soon as you sign it and remains in effect if you’re incapacitated. A springing DPOA only goes into effect after a specified event, usually incapacitation. This allows an agent to make financial, health, and legal decisions for you as needed.
Medical Power of Attorney
Also called an advance directive, this allows you to appoint someone to make medical decisions for you. This can include everything from medical treatment to organ donation, according to what you have specified in your living will or do-not-resuscitate order.
What to Know About the Types of Power of Attorney
When choosing between the options above, there are a few key points to keep in mind.
First, talk with your attorney about your current needs and situation, as well as your anticipated future needs. As mentioned above, some of these legal documents may suit your needs for short-term situations, while others can protect you in the long term. Keep in mind, of course, that there is no way to predict the future with accuracy, so it’s always a good idea to make a thorough plan.
In addition, you’ll want to make sure you read the document in full and work with your attorney to ensure that you understand the details. For example, under what circumstances can your agent use your springing power of attorney? How can you ensure that your agent can take control of your financial assets?
Next, for all of the options mentioned above, it’s critical to choose the right agent. Make sure you’re choosing an agent you can trust for the long term. Don’t forget that you can also appoint an alternate in case your agent is incapacitated or passes away.
Last, don’t forget that your power of attorney dies with you. To control what happens to your assets after your passing, you’ll need the additional protection of a will and trust.
Protect Yourself Today With a Power of Attorney
By now, it should be clear that everyone needs some form of power of attorney. This document can help you protect yourself in the case of incapacitation or illness, and it will also offer great peace of mind. It’s crucial, of course, to choose the right option according to your situation—which is where an experienced lawyer comes in.
To navigate the available types of power of attorney, or to start the process of creating yours, get in touch with us today. We’re here to help our clients with every aspect of the estate planning process, and our expert team can guide you through this critical decision.