Power of Attorney Definition
People often call us wanting a “simple will.” It’s on their “to-do” list. They poked around on the internet, armed themselves with information, and then called us or some other estate planning attorney demanding their simple will. That’s perfectly okay and they could be right. Often, though, they are confused about what that simple will actually is, and how other documents, like a power of attorney can be of much greater value.
This may not be what every estate planning attorney considers a simple will, but, for us, it is actually a package of documents. The main documents that make up a simple will package is a Will, Financial Power of Attorney; a Healthcare Power of Attorney; HIPAA Releases; and the Living Will (also known as Healthcare Directives). We include all of these documents to ensure your health AND your “stuff” are addressed in case of an emergency. For this post, we will only be focusing on defining the Power of Attorney documents.
What is a Power of Attorney?
When we use the term, “Power of Attorney,” we mean a legal document giving a person the authority to act for you in specified or all legal or financial matters.
There can be several types of Power of Attorney documents that provide different amounts of authority, that come into effect at various times, or that provide different types of authority to act. These documents plan an important role in your estate planning documents.
General Power of Attorney
A General Power of Attorney gives broad powers to a person so that they can act on your behalf. When someone has these general powers, they have the authority to handle financial and business transactions on your behalf, buy life insurance on your behalf, operate your business on your behalf, and make a whole host of other decisions on your behalf. A general power of attorney is a very powerful document. It can come in handy, if you go out of the country and need someone to handle things back home or if you become physically or mentally ill and cannot make decisions or manage your own affairs.
An example of this: We bank locally. We love the idea of investing in our local economy and the bank provides great, personalized customer service. However, when my credit card number was stolen while on a work trip and I needed to go to the bank to sign an affidavit at a branch, it was not very convenient. Luckily, Colin has power of attorney privileges and could go sign on my behalf. Also, luckily, the thief’s big splurge was making a run for Jack-in-the-Box and McDonald’s spending a whopping $30. I hope they’re loving it. (wink wink)
Limited Power of Attorney
A Limited Power of Attorney is much the same as above, BUT the authority given to the person is limited in some way. The authority may be limited to a series of real estate transactions or limited in how long it is in effect. For the purposes of your simple will package, we use two limited powers of attorney:
- Financial Power of Attorney – In this document, you grant your agent the authority to make financial decisions for you if you are unconscious, unavailable, mentally incapable of making decisions for yourself, or otherwise unable to make decisions for yourself. If you are out of town or in case there is an emergency, the person you have entrusted can make any necessary financial decisions. Of course, they can also make unnecessary financial decisions like withdrawing funds from a bank account, so choose wisely!
- Healthcare Power of Attorney – In this document, you grant your agent the authority to make medical decisions for you if you are unconscious, mentally incapable of making decisions for yourself, or otherwise unable to make decisions for yourself. Essentially, in case there is an emergency, the person you’ve designated can communicate with the doctors and make decisions for you. While putting these documents together, you will hopefully have a conversation with this person about your wishes as well, so that they can make the best possible decisions for you.
Durable Power of Attorney
A Durable Power of Attorney can be limited or general, but it has a special provisions that allows it to stay in effect even if you die or become legally incapacitated. Powers of Attorney become null and void when the person granting the powers dies or becomes incapacitated UNLESS there’s a provision in the document making it durable. This is typically important to have in the power of attorney documents contained in your will package.
Have any questions about powers of attorney or a simple will? Contact us!
Colin Ley is a Seattle estate planning attorney. He is also the co-founder of LayRoots along with his wife, Shreya.