You might not think much about granting or receive power of attorney. But this legal move in which you grant someone else the power to sign legal documents or make certain health and financial decisions on your behalf, might one day play a key role in your life.
None of us plan on becoming so incapacitated that we can’t make our own financial decisions. None of us plan on becoming so seriously injured that we can’t make decisions about our medical treatment. But these events do happen. And that’s where granting someone power of attorney can help.
Here’s an example: Say you are elderly, and you know you’ll have to make important health decisions soon. You might grant one of your children a health care power of attorney. Once you do this, you can still make health care decisions for yourself. But if you should become incapacitated – maybe you are unconscious or declared mentally incompetent – your child can then make medical decisions on your behalf.
And that’s just one example. Maybe your mother has minor surgery scheduled. Your father might not be able to take off work to transport her to the clinic or hospital. You and your mother can sign a form designating you as a temporary health care power of attorney. You would then have the legal right to sign any documents or forms to make sure that your mother receives proper medical care during her surgery. When the surgery is over and your mother wakes up, you no longer have the right to make any healthcare decisions on her behalf.
What Is Power Of Attorney (POA)?
At its most basic, power of attorney is a form that grants someone else the power to sign legal documents on your behalf.
The details of how power of attorney works is more complicated. Power of attorney can grant complete authority to someone to make financial or health decisions on your behalf. This type of power of attorney is known as full power of attorney.
But power of attorney can be more limited, too, providing someone the authority to make decisions for you but only for a limited time or if a certain event happens.
For instance, a financial power of attorney might only take effect if you should be declared mentally incompetent by a physician. A health care power of attorney might only be in effect while you are unconscious during surgery. You might grant someone with power of attorney to sign real estate and financial documents on your behalf if you’re unable to attend the closing on your home loan.
Typically, power of attorney gives someone the right to make decisions for you regarding:
- Finances
- Health care
- Gifts of money
- Guardianship
Types Of Power Of Attorney
There are several types of power of attorney, including general, limited, health care, durable and childcare. Here’s a look at each of these types.
General Power Of Attorney
A general power of attorney lets your agent handle your affairs during a limited period when you can’t do so yourself. You might give someone general power of attorney when you are traveling or if you are mentally unable to handle your affairs. A general power of attorney is often part of an estate plan.
Someone granted general power of attorney on your behalf can usually buy, sell and rent property; handle financial transactions; unlock safety deposit boxes; file tax returns; enter into contracts; purchase life insurance; settle claims; and exercise stock rights. You can also grant your agent the ability to maintain your business interests, make transfers to revocable living trusts, hire professional help and make gifts.
Limited Power Of Attorney
A limited or “special” power of attorney isn’t as far-reaching as general power of attorney. Limited power of attorney gives someone the power to act on your behalf only in specific situations. It also typically grants someone the power to take on only specific tasks.
You might give someone limited power of attorney to sign documents when selling your home if you become mentally incapacitated and can’t handle this task. You might also give an agent the power to sell stocks for you if those stocks reach a certain value while you are traveling out of the country.
Durable Power Of Attorney
A durable power of attorney remains in effect if you’re deemed mentally incompetent. This is important: Without this durable language, the person to whom you’ve granted power of attorney can only exercise any power that is also accessible to you.
That can become a problem. Say you’re in a coma and can’t sign a contract. Your power of attorney can’t sign it for you, either, unless you’ve given that agent durable power of attorney.
Because a durable power of attorney allows your agent to carry out the powers you’ve granted them regardless of your health and ability, it’s important to only grant this power to someone whom you trust.
Health Care Power Of Attorney
A health care power of attorney, also known as medical power of attorney, gives your agent the ability to make healthcare decisions on your behalf if you are unable to do so. If you’re in surgery and not conscious, you might assign someone power of attorney to make medical decisions on your behalf until the surgery is complete.
Health care power of attorney is often referred to as a health care proxy. Basically, this means that you’re appointing someone to make decisions for you if you can’t make them on your own.
A medical power of attorney doesn’t forfeit your right to give medical instructions to your doctors when you’re able to do so. It only takes effect when you don’t have that ability, whether you are unconscious or deemed mentally incompetent.
But how is mental incompetence determined? In your power of attorney document, you can name a doctor who is charged with making that decision. You can also require that at least two licensed physicians agree on your condition.
Be aware that a health care power of attorney is not the same as a living will. A living will states what medications you want and what type of you care you want to receive. But only a power of attorney can authorize someone to make decisions for you that aren’t specifically covered in your living will.
Child Care Power Of Attorney
With this power of attorney, you can appoint an agent to take care of your children temporarily when you are unable to do so. You might use this power of attorney if you face time in jail or you are entering a lengthy stay in rehab. This power of attorney will give someone you trust the ability to care for your children until you are ready to do so again. This could prevent you from losing custody of your children.
Power Of Attorney FAQs
How do I gain power of attorney?
There are times when you’ll want to gain power of attorney. Maybe it’s so you can make decisions about your aging parents’ medical care. Or maybe you’d like power of attorney to make decisions about their real estate or financial matters. You should first speak with your parents to determine if they also want this. If they do, they’ll have to sign a form granting you power of attorney. They must be considered mentally competent to sign this form.
If someone wants you to sign a power of attorney form, remember this rule: You need to give your consent and signature for the power of attorney to take effect. And you can only give power of attorney to someone if you are legally competent to make this decision.
You’ll also need to determine what type of power of attorney you want to accept or give. Remember, you can accept or give up power of attorney that’s temporary, permanent, only covers medical decisions or only covers financial and tax decisions.
Where can I get POA forms?
If you’re ready to accept or give power of attorney, what’s your next step? It’s time to find the forms that start the process.
- You can find power of attorney forms online, but it’s best to work with an attorney in your state, as there is not a standard POA form for all 50 states. The power of attorney process can also be complicated. It’s smart to rely on the legal advice of someone who knows your state’s rules.
- How much the power of attorney process costs will vary. If you accept power of attorney through a legal website, the cost might be $50 or less. If you work with an attorney, the cost will probably be higher. Again, though, working with an attorney can help you avoid possible legal problems in the future.
- Though power of attorney is usually given to family members, it doesn’t have to be. You can give power of attorney to friends, co-workers or a trusted financial advisor. You can also accept power of attorney at the request of such non-family members.
What do I fill out in a POA form?
Each state’s power of attorney form differs. A good example, though, is the durable power of attorney form for Minnesota. This form is typical of power of attorney documents.
Here are the basic steps of filling out a standard power of attorney form, using the Minnesota durable POA as an example.
- Read The Description
The top of the Minnesota durable power of attorney form gives a brief description of the powers granted by the document. It also states that you have the right to revoke the power of attorney.
- Add Your Personal Information
The form asks for the name and address of the person granting power of attorney and the names and addresses of the people receiving power of attorney. These people are listed in the form as attorneys-in-fact.
- Designate Any Successor Attorneys-In-Fact
There’s also a space for successor attorneys-in-fact. These are people you designate to receive your power of attorney if one of your first choices should die, resign or become unable to serve. Listing successors is optional.
- Choose An Ending Date
You also have the choice of adding an ending date for the power of attorney. This is optional, too. You might choose to grant power of attorney on a permanent basis. In this case you wouldn’t need to list an end date.
- List The Powers You Are Granting
The form then lists several powers that you can grant to your agent. You should put a check mark or “X” next to the powers that you’re granting. You can, for instance, give power of attorney to a family member for banking transactions, insurance transactions or business operating transactions. You can also choose to grant power of attorney to an agent for all the powers listed on the form.
- Incapacitation
The form next asks whether you want power of attorney to remain in effect if you become incapacitated or incompetent. For example, if you’re injured in an auto accident and fall into a coma, the power of attorney you granted will remain in effect even though you’re incapacitated if you choose that option.
- Sign The Form
There’s also a section on the form for your signature and for the signatures of the people who were named your attorneys-in-fact. You’ll also need the signature of a notary public to make the power of attorney form official.
- Have It Notarized
Many states require a POA form to be notarized. Even in states that don’t require a notary to sign the form, doing so can help you avoid any legal issues in the future.
The Bottom Line
Deciding whether to grant or accept power of attorney is a big decision. If you are receiving power of attorney, make sure you are comfortable taking on the responsibility of making medical or financial decisions for someone else. If you are giving power of attorney, you must be certain that you are handing over this power to someone whom you trust. If you have questions about using a power of attorney to buy or sell a house, contact one of our Home Loan Experts for assistance.
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