What is a Power of Attorney & Why is it Important?

By Elijah Waugh

A power of attorney is arguably the most important element of a thorough estate plan. This crucial document gives one or more individuals the authority to act on the signor’s behalf. This authority can be broad or limited in scope, can be immediately effective or contingent upon certain events, and can be terminated or revoked at any time.

What is an Attorney-in-Fact (aka financial agent)

The individual or individuals selected to serve on the signor’s behalf are referred to as an “agent” or an “attorney-in-fact.” Once a power of attorney is in effect, the attorney-in-fact will be able to conduct all transactions provided for in the document. Common examples of the types of transactions attorneys-in-fact will conduct are handling banking matters, selling vehicles, and managing real estate.

Commonly, individuals will appoint an attorney-in-fact for the simple reason that it is convenient. For some who are more advanced in age, who may not see as well, hear as well, or are tired of managing their own affairs, having a trusted individual with the ability to act on your behalf can be extremely beneficial.

The Benefits of Pre-planning

However, the importance of a power of attorney extends much further than simple convenience. If an individual who does not have a power of attorney becomes incapacitated and is unable to manage their own affairs, a court may have to appoint an individual to act on their behalf. This type of appointment is commonly referred to as a guardianship or conservatorship. Having a power of attorney will avoid the discomforts of court, the intrusion of the state, and gives the individual the ability to select their own agents.

The benefits of a power of attorney do not stop at convenience or autonomy. If an individual is incapacitated and in need of specialized care, such as assisted living or in-home care, a properly drafted power of attorney can serve as a crisis planning asset protection tool. Specifically, this document can allow individuals to qualify for Medicaid while keeping some of their assets.

Words Do Matter

If you do not have a power of attorney, it is paramount that you have one prepared. If you do have a power of attorney, it is not enough that you simply have a document called a power of attorney, it matters what that document says. Many states will require explicit language granting the attorney-in-fact the authority to engage in specific transactions. Therefore, it is vitally important that if you have a power of attorney, but it is dated or was drafted by an attorney who does not specialize in estate planning or eldercare, it should be reviewed or redone by an accredited estate planning and eldercare attorney.

Please call or contact us if you have any questions about a power of attorney, or if we can be of assistance in any way.