Do you need a power of attorney? If so, when would I need a power of attorney? If I get a power of attorney, what can be done with it? When is it effective? What happens to it when I die?
Now that we are living, at least for the time being, in a world that seems to be controlled by the COVID-19 virus, a power of attorney sounds like a critical document to have, whether healthcare or financial. It is, but many people are unsure of what it is, how it operates, etc. Let’s walk through a few of the most common questions people have regarding these important documents.
Q: What is a Power of Attorney?
A: Simply put, a power of attorney is a grant of decision-making authority to an “attorney in fact” or “agent” whom you appoint (an “attorney in fact” is the person who acts for you, and they do not need to be an attorney). In the areas of finance or healthcare (what does money or health not touch?) you are granting another person, selected by you, to be able to make decisions on your behalf.
Q: When is a power of attorney effective?
A: It depends on the type of power of attorney you select. There are two types: springing and durable powers of attorney. We will walk through both.
Springing: this POA takes effect only upon the incapacity of the principal (which would be you, the person making the POA). The agent is only authorized to act when you are incapacitated. This does mean that the agent will have to show your incapacity before the POA will be honored.
Durable: this POA is effective immediately upon signing. Your agent will be authorized to act on your behalf as soon as you sign the document. While this is a sizable amount of authority you give right away, your selection of an agent should be based on your trust in the agent’s character and judgment. An advantage over the springing POA is that it is easier to exercise on the agent’s side of things.
Pro Tip: always go with the Durable Power of Attorney, the necessity of showing the incapacity will delay things. Choose someone you trust (ideally with one or more alternates) to act on your behalf. Now that the coronavirus is threatening to overwhelm the healthcare system, at least in several regions, it is best to make things as simple as possible.
Q: When is a POA necessary?
A: Dovetailing off of the above, a POA is necessary when you need an agent to be able to make decisions, sign documents, discuss and approve medical treatments, deal with banks, etc. You might be incapacitated, or you might just want the agent to act on your behalf (you cannot be there to sign the docs for the sale of your house, so the agent is able to do that for you, or you are unresponsive in a medical situation and need someone to approve various medical procedures). As you can see, there are many times that a POA might be or is necessary.
Q: What happens to the POA when I die?
A: POAs do not survive the death of the principal, meaning, when you die, the POA is no longer effective. The personal representative/executor or your estate will step in and take over.
Q: Who needs a POA?
A: Everyone. Anyone who has reached the age of majority (is no longer a minor) needs to have a POA. That means you should have healthcare and financial powers of attorney when you turn 18. If no longer a minor, your parents cannot make decisions for you, etc. In short, everyone needs a power of attorney.
These are some of the most common power of attorney questions that I have heard. Bottom line, everyone needs both a financial and a healthcare power of attorney as soon as possible.
Eifert Law Firm
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