A power of attorney is essentially a legal authorization that allows a person to act on behalf of another person. This type of authorization allows an individual, agent, or attorney-in-fact to make decisions on behalf of a principal. It can give the agent broad or limited authority to make financial, medical, and property decisions.
There are two main types of POAs: health care and financial. In both instances, they provide the attorney-in-fact with limited or general powers. We’ll discuss both in further detail down below.
How It Works
A power of attorney is typically used for a principal’s disability or temporary illness. It can also be used to make financial decisions on behalf of the principal. The individual should choose the person who should be handling their affairs.
Most powers of attorney documents allow the agent to make financial and property decisions on behalf of the principal if needed. If the agreement ends, the person who should be handling the principal’s affairs should not be able to make decisions for themselves.
A power of attorney can be used in the case of an unexpected need. An example would be long-term care or incapacitation. It can also be used to make financial decisions for individuals who cannot decide for themselves.
Health Care Power of Attorney
For health care power of attorney, there are a few terms one must understand. It is also called a durable power of attorney or health care proxy.
It is a document that allows the principal to give an agent the authority to make health-related decisions on their behalf. This document outlines the principal’s consent to enable the agent to make these decisions. This is legally bound to act on behalf of the principal when they can no longer make their own decisions.
Financial Power of Attorney
The financial POA allows an agent to manage the principal’s financial affairs, such as making deposits and withdrawals from their accounts and signing checks. It can also be used to manage investments if people cannot make their own decisions.
The agent is bound to carry out the principal’s wishes to the extent of the agreement. A financial power of attorney allows an individual to make various financial decisions independently. These include making deposits and withdrawals and changing or revoking the beneficiary designations of their bank accounts.