What Is Power of Attorney?
In simple terms, a power of attorney is a document that lets you name someone to make decisions on your behalf and states that someone else has the power to sign legal documents on your behalf. The power of attorney can take effect immediately in the event that you become unable to make decisions on your own. Such events include you becoming mentally incapacitated or not being in the country for an extended period of time. This person will then be able to make these important choices for you.
Of course, the explanation above is just the short version. Power of attorney is not quite as simple as that. Depending on what you choose, it can grant complete authority to that person or can be limited to only certain acts or specific periods of time.
1. Full Power of Attorney
The form is called a full power of attorney only when it grants that person the right to make all decisions on your behalf and in your best interest.
2. Limited Power of Attorney
As the name suggests, a limited power of attorney is valid only for specific events or certain time periods. For instance, if you assign someone limited power of attorney to sign real estate and financial documents on your behalf, it means that they’ll be able to sign only these types of documents and nothing else.
3. Durable Power of Attorney
A durable power of attorney is applicable in case you become incapacitated. It will stop the court from stepping in and appointing someone to make decisions for you and take control of your finances.
You would be wrong to think that you don’t need to understand what a power of attorney is. None of us knows exactly what the future holds and life can take some unexpected turns. Hence, it is crucial to know what one is and when to use it.
The Two Types of Power of Attorney
In addition to the full, limited and duration power of attorney, there is another way to classify it. In terms of content, there can be two types of POA. As mentioned above, this document allows a person, also called the principal, to decide in advance whom they trust enough to act on their behalf should they become incapable of making their own decisions. The person who will be chosen to act on behalf of the principal is called the agent.
So, what are the types of power of attorney? There are generally two main types of POA:
- The Medical Power of Attorney
A medical power of attorney, also called healthcare POA, grants the agent (which can be a trustworthy friend or family member) the ability to make all or some decisions about the type of care the principal can receive in the event that they are incapacitated and cannot make that decision for themselves.
- The Financial Power of Attorney
This type of power of attorney allows the agent to make financial decisions on behalf of the principal.
You may choose to get both types of power of attorney, but it would be unwise to appoint the same person for each of them.
Medical Power of Attorney: What Kinds of Decisions Can the Agent Make?
A healthcare agent can make decisions about the following:
- The type of medical care, hospital care, psychiatric treatment, home health care and surgery the principal can receive. The only catch is that these choices are heavily dependent on the financial means of the principal. The healthcare agent will probably have to get the approval of the principal’s financial agent as well.
- The types of doctors and care providers the principal can have.
- The living arrangement of the principal. The agent can also make decisions regarding residential long-term care, such as memory care, assisted living, and nursing homes. Just like the first point, the principal must be able to afford their living arrangements. The healthcare agent will, therefore, have to run it by the financial agent so that they approve these costs.
- Who bathes the principal and take care of their general hygiene.
- What the principal can eats
Financial Power of Attorney: What Kinds of Decisions Can the Agent Make?
A financial agent can do the following:
- Pay for health care, housing needs and other bills of the principal by accessing their financial accounts. They can also apply for public benefits for the principal, such as aa veterans’ benefits.
- Make an investment on behalf of the principal
- File the principal’s taxes.
- Collect debts on behalf of the principal.
- Manage the principal’s property.
What An agent Cannot Do:
Healthcare agents and financial agents cannot:
- Change a principal’s will.
- Transfer the power of attorney to someone else. While the agent can decline their appointment, they cannot just change the agent without the approval of the principal.
- Unless named as the executor of the principal will, the agent cannot make decisions on behalf of the principal after their death.