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A power of attorney is a document that allows you to
appoint a person or organization to handle your affairs while you're unavailable
or unable to do so. The person or organization you appoint is referred to as an
"Attorney-in-Fact" or "Agent."
General Power of Attorney -
authorizes your Agent to act on your behalf in a variety of different
situations.
Special Power of Attorney -
authorizes your Agent to act on your behalf in specific situations only.
Health Care Power of Attorney
- allows you to appoint someone to make health care decisions for you if you're
incapacitated.
"Durable" Power of Attorney
-The general, special and health care powers of attorney can all be made
"durable" by adding certain text to the document. This means that the document
will remain in effect or take effect if you become mentally incompetent.
Revocation of Power of Attorney
- allows you to revoke a power of attorney document.
General Power of Attorney
A general power of attorney is very broad and provides
extensive powers to the person or organization you appoint as your agent. These
powers usually include:
· Handling banking transactions
· Entering safety deposit boxes
· Handling transactions involving U.S. securities
· Buying and selling property
· Purchasing life insurance
· Settling claims
· Entering into contracts
· Exercising stock rights
· Buying, managing or selling real estate
· Filing tax returns
· Handling matters related to government benefits
You also have the option to grant the following additional
powers to your Agent:
· Maintaining and operating business interests
· Employing professional assistance
· Making gifts
· Making transfers to revocable ("living") trusts
· Disclaiming interests (this has to do with estate
planning strategies to avoid estate taxes)
A general power of attorney is usually used to allow your
agent to handle all of your affairs during a period of time when you are unable
to do so. For example, when you are traveling out of the state or country or
when you are physically or mentally unable to handle your affairs. A general
power of attorney is frequently included as part of an estate plan to make sure
that you have covered the possibility that you might need someone to handle your
financial affairs if you are unable to do so.
Special Power of Attorney
A special power of attorney allows you to give only
specific powers to the person or organization you appoint as your "Agent." For
example, you could authorize someone to sell a car or a house for you.
Many people use the special power of attorney to authorize
their Agent to do one or several of the following:
· Handle banking transactions
· Enter safety deposit boxes
· Handle transactions involving U.S. securities
· Collect debts
· Sell real estate
· Mortgage real estate
· Manage real estate
· Sell personal property
· Borrow money
· Manage business interests
· Handle government issues
· Make financial decisions
· Make estate planning decisions, including gifts
A special power of attorney is often used to allow your
Agent to handle specific situations for you when you are unavailable or unable
to do so. For example, you may be traveling outside the state or country, or you
may be unable to handle a specific situation because of other commitments, or
health reasons.
Health Care Power of Attorney
A Health Care Power of Attorney is a document that allows
you to designate a person (an "Agent") who will have the authority to make
health care decisions on your behalf if you are unconscious, mentally
incompetent, or otherwise unable to make such decisions. In many states you can
also express your wishes regarding whether you wish to receive "life-sustaining
procedures" if you become permanently comatose or terminally ill, in the Health
Care Power of Attorney document. This will help your agent to know your wishes
as he or she makes decisions for you. Even if you do include this in the
document, you should still discuss the Health Care Power of Attorney with the
Agent, expressing your wishes, values and preferences regarding health care.
A Health Care Power of Attorney is different from a Living
Will because it allows you to appoint someone to make health care decisions for
you. A Living Will only allows you to express your wishes concerning
life-sustaining procedures.
Both Living Wills and Health Care Powers of Attorney are
considered "Advance Health Care Directives" because you're giving instructions
on what you'd want to happen in the event that you become unable to make health
care decisions in the future. Some states also have a specific "Advance Health
Care Directive" document that combines elements of a Health Care Power of
Attorney and a Living Will. (For a more in-depth look at Advance Health Care
Directives, Health Care Powers of Attorney and Living Wills, click here.)
Even if you have executed a Health Care Power of Attorney,
you still have the right to give medical directions to physicians and other
health care providers as long as you are able to do so. This document only
becomes effective when you do not have the capacity to give, withdraw or
withhold informed consent regarding your health care.
Durable Power of Attorney
A "durable" power of attorney is actually a general,
special or health care power of attorney that contains special durability
provisions. If you become mentally incompetent while you have a power of
attorney document that's already in effect, a durability provision will allow
the document to stay in effect.
You can also sign a durable power of attorney document to
prepare for the possibility that you may become mentally incompetent due to
illness or an accident. In this case, you would specify that the power of
attorney wouldn't go into effect unless a doctor certifies that you are mentally
incapacitated.
You don't have to choose a lawyer to be your agent, but it
is important to select someone you trust. The relative, friend or business you
choose to be your Agent will be acting on your behalf regarding your financial
or health care issues. You need to choose someone who won't abuse the powers you
grant to them and will look out for your best interests.
In general, an agent is only held responsible for
misconduct that's intentional, not for unknowingly doing something wrong. This
type of protection is included in most power of attorney documents to help
encourage people and organizations to accept the responsibility of being an
Agent. Usually there is no financial incentive to serve as an Agent, most serve
without compensation.
Successor Agents
There is always the possibility that the person or
organization you appoint as your Agent either won't be able to serve or will
refuse to serve. That's why you have the option of appointing a Successor Agent
who can take over as Agent if necessary.
Here is an illustration of why appointing a Successor
Agent is a good idea: An elderly husband names his elderly wife as his Agent.
After signing the power of attorney document, they are both diagnosed as having
Alzheimer's disease. The wife becomes mentally incompetent and can't serve as
her husband's Agent. The husband is also mentally incompetent and can't sign a
new power of attorney. If the husband had named a Successor Agent, he or she
could have taken over as Agent.
Mental Competence
In order for a power of attorney document to be valid, you
must be mentally competent when you sign it. This means that you must understand
the powers that you are granting to your Agent and the implications of having
someone else make decisions for you. If there is any question about your mental
competence, it's a good idea to have a physician evaluate you and state in
writing that you are competent.
If you have signed a "durable" power of attorney document,
it will either remain in effect or go into effect if you become mentally
incompetent. But how will your mental competence be determined? This is
something that you can spell out in the document. For example, you can name a
physician whom you wish to make the determination. Or, you can require that two
licensed physicians agree on your mental capacity.
Even if your document doesn't set specific requirements,
it's still likely that your Agent will have to get a doctor's written
confirmation of your incompetence. Most businesses and organizations won't allow
your Agent to act on your behalf without it. In some cases, a court may be
required to decide the issue using generally accepted standards.
How does a doctor decide if you're mentally competent? In
general, the doctor will consider whether you have an understanding of the
subject area covered by the Power of Attorney, whether you understand the
implications and importance of the matters involved, and whether you can make
and communicate reasoned choices.
Signing the Document
A power of attorney must be signed by the person granting
the authority (known as the "Principal"). The Principal must be mentally
competent at the time of the signing in order to make the document legally
binding. If there is any question about the Principal's mental competence, a
physician may be asked to certify in writing that the person understands the
document and the consequences of signing the document.
The signature on a power of attorney should also be
notarized. Notarization makes it harder for someone to challenge the validity of
the signature. It also allows the document to be "recorded" for use with real
estate transactions.
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