Reasons for Using Power of Attorney
Most people underestimate the need for using power of attorney. These forms can prevent a lot of problems that can occur should you become incapacitated. They can also ensure medical care is given or withheld in accordance with your wishes.
Essentially, power of attorney is needed to ensure important tasks can be carried out on your behalf. They can authorize an agent to pay your mortgage, utilities, and other living expenses from your bank account. They can let a person manage your investment accounts or take control of a business that you own.
A power of attorney form ought to be created for any type of personal or business transaction that requires your signature. Without these important forms, relatives and business partners will be unable to do important tasks unless they obtain permission from the court.
Why You Need Power of Attorney
The simplest answer to why you need power of attorney is because situations arise that can prevent you from doing things. If you're stricken with a long-term illness or involved in a tragic car accident, who will look out for you, your property, and your finances?
No one likes to think about bad things happening, but being unprepared brings about hardship for family members during an already stressful time. In order to gain control over bank accounts or medical decisions someone will have to become your public guardian. In order to do that, they will have to hire a lawyer and appear in court.
A simple remedy is preparing power of attorney ahead of time. Unfortunately, unexpected events happen to people every day. Taking time to fill out required forms ensures important tasks and decisions can be carried out during time of incapacity.
Types of Power of Attorney and Their Uses
Each type of power of attorney involves a Principal – the person creating the document, and an Attorney in Fact – a personal agent who represents the Principal. Let's take a look at five at the most common forms and their uses.
General Power of Attorney: This document lets Principals' give broad powers to their agent. It's used for personal and business reasons and allows agents to perform virtually any task you would normally do. Agents can perform duties during times of medical incapacitation or at other times, such as while you are out of town.
There are numerous uses for general POA. They are often used to let agents:
- Manage personal finances, such as banking transactions and financial investments or retirement accounts
- Manage real estate investment properties, or buy, sell or transfer property
- File tax returns or enter into negotiation with the IRS to reconcile back taxes
- Settle creditor claims resulting from unpaid bills
- Enter into business contracts and agreements
- Make cash gifts to family members or charitable organizations
Limited Power of Attorney: As the name implies, this document "limits" agent responsibilities to specific duties. Once agents carry out the task their privileges are terminated. This form is often used to let agents:
- Buy or sell titled property such as a motor vehicle or real property
- Sell personal property such as collectibles, jewelry, or artwork
- Act as a mediator with government agencies like Social Security Disability, Internal Revenue Service, or Medicare
- Collect debts owed to the Principal
- Handle personal finances
- Manage financial investments or business interests
Durable Power of Attorney: Adding the word 'durable' to POA gives agents additional powers. The type of legalese included can prevent agents from engaging in activities that could result in problems for you later down the road. For instance, you could state that agents are not allowed to borrow money in your name or prohibited from selling real estate.
Since durable power of attorney lets agents carryout a wide range of duties it is vital to work with a lawyer to ensure proper legalese is included. It's also imperative to designate someone you can trust to keep your best interests at the forefront.
Springing Power of Attorney: This form can be used in lieu of durable POA. Instead of giving broad or limited privileges to agents, this document only lets agents perform duties according to directives outlined by the Principal.
For instance, a springing power of attorney might only be effective if a physician remits a formal declaration of incapacity. Or, it might designate agents' rights become effective on a certain date or when a certain event occurs.
Medical Power of Attorney: This document empowers agents to provide medical directions to physicians in the event you cannot do so. Agents are not involved until specific events occur, such as a physician's declaration of incapacity.
Medical POA authorizes healthcare workers to share medical records and discuss treatment plans with your designated agent. Copies of the form ought to be supplied to the attorney in fact, physicians, and health insurance provider.
How to Arrange Power of Attorney
Since power of attorney gives people authority to take on important roles of your life it is advisable to hire a lawyer to prepare forms. Certainly, there are pre-printed forms that can be purchased online, but if the document isn't filled out correctly or does not include adequate information than it is useless.
Every power of attorney has to be signed, witnessed, and notarized. If the POA is related to real estate transactions it will need to be recorded through the local court. Any time agent privileges are revoked for forms filed with the court than a termination POA also must be recorded.
Power of Attorney and Estate Planning
Power of attorney forms go hand-in-hand with estate planning. It's always advisable to obtain legal counsel to ensure estate assets are fully protected. Although POA privileges are terminated upon death of the Principal, these forms ensure things are taken care of in the event tragedy strikes.
While estate planning is important for every adult, it is even more important for California residents. The GoldenState is known for having the most complex probate laws in the nation.
Residents ought to learn ways to avoid probate because assets can be suspended in court for many months. Working with a California estate planning lawyer can ease estate settlement burdens and reduce estate and inheritance tax.