What Is a Power of Attorney & How Does It Work?
A power of attorney (POA) is a legal document that allows one person, commonly known as the agent, the authority to act on behalf of another person, called the principal. The scope of this authority varies widely and can encompass financial, legal, and health-related decisions. U
Roles & Limitations in a Power of Attorney Agreement
In a power of attorney agreement, the principal is the individual who creates the POA, designating another person as their agent. The agent is given the authority to act on the principal's behalf under the conditions specified in the POA.
The principal defines the scope of the agent's power. It can be broad or limited, depending on the principal's needs and the type of POA. However, there are limitations. For instance, unless specified otherwise, an agent cannot alter a principal's will or make decisions after the principal's death.
The Importance of Powers of Attorney in Estate Planning
Having a power of attorney is a crucial aspect of estate planning, offering several legal advantages. Suppose an individual becomes unable to manage their affairs due to sickness or harm. In that case, a POA ensures their matters will be conducted in line with their preferences.
For instance, an elderly parent might create a durable power of attorney and name one of their adult children as the agent. If the parent later develops Alzheimer's disease and becomes unable to manage their financial affairs, the named child could use the power of attorney to pay bills, manage investments, and handle other financial matters for the parent.
Types of Power of Attorney
There are various types of POAs that allow agents to have different types of authority, including (but not limited to):
- A general power of attorney gives the agent broad powers to act on behalf of the principal. These powers may include managing financial and business transactions, operating business interests, buying life insurance, settling claims, making gifts, and employing professional help. A general power of attorney is often included in an estate plan to ensure someone can handle financial matters.
- A limited power of attorney, also known as a special power of attorney, grants the agent the power to act on behalf of the principal in specific situations only. For instance, the principal might give the agent power to sell a particular property on their behalf.
- A durable power of attorney automatically extends the duration of the power of attorney agreement beyond the principal's incapacity. Without a durable clause, the power of attorney will terminate if the principal becomes incapacitated.
- A healthcare power of attorney gives the agent the authority to make healthcare decisions for the principal when they are incapable of doing so. This type of POA is generally used in conjunction with a living will.
Experienced & Reliable Estate Planning Attorneys
At Nelson, Taylor & Associates, we take pride in our commitment to integrity and dedication to our clients' needs. Trust is a core aspect of our firm's foundation, and we strive to cultivate it with each of our clients.
We offer comprehensive counsel in estate planning matters, including the drafting of powers of attorney documents, and we believe in empowering our clients through knowledge and understanding. As such, we strive to provide resources and information that can help you make informed decisions. From understanding the implications of a power of attorney document to grasping the broader scope of estate planning, we are here to provide guidance and support.
Get in touch with our team online or via phone at (801) 901-7046. We offer free initial consultations.
