11 Sep What Does Power of Attorney Do?
Estate planning isn’t just about preparing for what happens after you pass away. You also need to plan for unexpected events that can occur during your lifetime. Every estate plan should include a power of attorney document.
Naming someone as your power of attorney can help protect your assets—and yourself—should you ever become incapacitated. Here’s why you need a power of attorney to act on your behalf and what that agent can and cannot do.
What Is a Power of Attorney?
A Power of Attorney (POA) is a legal document. It authorizes a person, also known as your POA agent, to make important decisions or act on your behalf. The range of powers can be broad or limited, depending on your preferences and your specific needs.
For instance, you can name a power of attorney to handle all of your healthcare decisions, or you can name a POA solely for the purpose of selling your real estate property.
But no matter what you designate your power of attorney to do, the POA agent has a fiduciary duty to act in your best interests. You can also change or revoke your power of attorney at any point, as long as you are of sound mind.
Types of Power of Attorney
In Arizona, there are three main types of power of attorney:
- Financial Power of Attorney authorizes your agent to handle financial affairs on your behalf.
- Medical Power of Attorney allows your agent to make important healthcare decisions for you, and is often informed by your living will.
- General Power of Attorney gives your agent the authority to make both financial and healthcare decisions for you.
All three types of POA can be either “durable” or “springing.” A durable power of attorney goes into effect immediately. A springing power of attorney, however, does not take effect until a trigger event occurs, such as a stroke or coma that incapacitates you.
What Does a Medical Power of Attorney Do?
You can designate your medical power of attorney to do any or all of the following:
1: Make Medical Decisions
The main duty of a medical POA agent is to make decisions related to your medical treatment, such as surgeries, medications, etc. They are responsible for ensuring that their medical decisions align with your preferences and values.
2: Communicate with Healthcare Professionals
Your POA agent can communicate with doctors, nurses, and other health professionals on your behalf. They can ask questions, gather information about your condition, and provide consent for your medical treatments.
3: Access Medical Records
A medical POA agent can also access your medical records and review your history in order to make informed healthcare decisions.
4: Make End-of-Life Care Decisions
If you’re unable to communicate, your agent has the authority to make end-of-life care decisions. It’s important to prepare a living will that dictates your stance on life support and other end-of-life decisions to help your agent make the right choices.
What Does a Financial Power of Attorney Do?
You can give your financial agent the power to do any or all of the following:
1: Manage Financial Accounts
Your financial power of attorney agent can access your bank accounts to make deposits and withdrawals, and can even sign your checks. They can also access and manage your retirement accounts, brokerage accounts, and other financial holdings.
2: Pay Bills and Manage Debts
Your agent can pay your bills, manage any outstanding debts, and keep all of your financial obligations in order.
3: File Taxes and Handle Tax-Related Matters
Your financial POA agent can file your tax returns on your behalf, respond to tax notices, and handle other tax-related matters.
4: Buy, Sell, or Manage Real Estate
If you own real estate, your agent can handle property transactions such as buying, selling, leasing, and managing your properties.
5: Manage Investments
A financial POA agent can make investment decisions and manage your investment portfolios.
6: Operate a Business or Manage Business Transactions
If you own a business, your POA agent can manage its operations, sign contracts, and handle all business-related transactions.
7: Pay for Your Medical and Living Expenses
Your POA agent can use your funds to pay your medical expenses, living expenses, and any other costs necessary for your well-being.
What Does a General Power of Attorney Do?
You can instruct your general POA agent to do any or all of the following:
1: Make Medical and Financial Decisions
A general power of attorney combines the duties and responsibilities of a medical and financial POA. That means they can make important decisions relating to the following:
- Medical care
- Financial matters, such as taxes, banking, and investments
- Real estate transactions
- Business operations
2: Make Legal Transactions
Your agent can sign contracts, enter into agreements, and deal with any legal matters related to your affairs.
3: Handle Insurance Matters
Your agent can manage your life insurance policies, make premium payments and handle insurance claims. They can also enroll you in insurance if you do not currently have coverage.
4: Change Your Trust
In certain circumstances, your power of attorney agent can make changes to your living trust on your behalf. For example, your trust may need to be changed if one of your beneficiaries dies before you do.
What Can’t Your Power of Attorney Do?
Power of attorney isn’t all-encompassing. There are still many limitations to what your agent can and cannot do.
For instance, your power of attorney may not:
- Make changes to your will
- Transfer power of attorney to another person
- Make legal or financial decisions after you pass away
- Distribute your assets after you pass away
- Use your funds as their own
- Act outside of your best interests
Five Tips for Choosing a Power of Attorney
Selecting the right person to be your POA agent is a decision that should never be taken lightly. This person will have significant authority over your financial affairs and/or healthcare. Here’s how to choose the right person.
- Choose someone you trust implicitly, who will have your best interests at heart and reliably make decisions that align with your wishes.
- Discuss your values, beliefs, and preferences with potential candidates in advance. It’s especially crucial to discuss your healthcare wishes, as those decisions can be very difficult to make.
- Make sure the person you choose has the capacity to communicate effectively with medical professionals, financial institutions, and other important parties so you can ensure that your wishes will be honored.
- Choose someone who is available and willing to take on the responsibility. Someone who lives in another state may not be the best choice.
- If you’re choosing someone to handle your finances, it’s a no-brainer that you should select someone who is financially responsible.
Work with an Experienced Estate Planning Attorney
No one likes to think about an uncertain future. But sudden accidents and certain medical conditions can unexpectedly result in incapacitation, so it’s best to be prepared.
The compassionate team at Phelps LaClair can help you draft a valid power of attorney that thoroughly covers your needs. Call 480-892-2488 today to schedule an appointment in Mesa, Chandler, or one of our other Phoenix Valley locations.
Images used under creative commons license – commercial use (9/11/2023). Photo by Steven HWG on Unsplash