10 Dec What Does Power of Attorney Mean?
When going through the estate planning process, you may encounter words and phrases you’re not familiar with. One of the most misunderstood terms is “power of attorney.” Here at Phelps LaClair, we want our clients to fully understand every aspect of their estate plans. In this article, we’ll explain what power of attorney means, and when it might be used in the estate planning process.
What does a power of attorney do?
A power of attorney—also called a POA—is a legal document that allows another person you designate to make decisions for you on your behalf. Only you can complete and sign a power of attorney document and choose a person that you trust to make legal choices for you when you are not able.
You can designate one person to be your POA, choose multiple people to act jointly in the decision-making, or specify which of your affairs you wish each person to oversee. Most people who grant a power of attorney choose:
- Their spouse or partner
- An adult child
- Their brother or sister
- Another family member
- A close friend
The person you designate with power of attorney over your affairs is usually called an “agent.” Depending on the type of power of attorney you establish, this agent can legally make decisions on your behalf in regards to your finances, property, healthcare, and other estate matters.
For example, a general power of attorney grants the right to make decisions on any aspect of your estate plan. Or, you can establish a POA just for making financial, healthcare, or other specific decisions, such as managing your real estate or business affairs.
Who needs a POA?
The easy answer to this question is: everyone. Life has many twists and turns, and sometimes things do not go as planned. Entrusting someone else with the legal right to make decisions for you and your estate is very important if you become incapacitated. For this reason, we suggest that everyone sets up a power of attorney as part of their estate plan.
Granting power of attorney is always important for:
- Anyone planning to retire or who has recently retired
- Anyone who has just had a baby or adopted a child
- New homeowners
- Business owners
- Military personnel
- Anyone diagnosed with a potentially incapacitating illness
What is a power of attorney used for?
A POA gives your agent the right to make important decisions regarding you and your estate when you are unable to make those decisions yourself. For example, say you are involved in a serious car accident that leaves you in a coma for a few weeks. During the time that you are unconscious, you are unable to make decisions regarding your healthcare or finances.
Having granted POA to your oldest son will allow him to step in and legally make decisions on your behalf. With your legal permission, your son becomes the one who makes decisions about your healthcare, finances, real estate, or business until you regain consciousness.
Granting power of attorney gives that person the right to direct most of your affairs. However, there are several things a person with POA cannot do. Power of attorney does not grant your agent the right to make changes to your will, break their promise to be your financial trustee, or make decisions for you after you die.
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Many times estate planning clients come to Phelps LaClair under the impression their will covers all of their wishes and they do not need to establish a POA. Unfortunately, that is not the case—a will is an essential document, but it only says what should happen to your estate should you pass away.
A POA grants someone the right to make decisions for you while you are still alive. Having a trusted person in your corner for making financial, healthcare, and property decisions when you cannot gives you great peace of mind in case anything ever happens. Contact us today at 480-892-2488 to talk to one of our team members about setting up your power of attorney.