A power of attorney is a legal document granting someone the ability to act on your behalf in legal matters. Basically, the person you appoint (often referred to as your “agent” or “attorney-in-fact”) will be able to legally represent you in legal situations. Here’s an introduction into the ins and outs of powers of attorney and a brief discussion of whether one may be right for you.
A general power of attorney is very broad. It gives your attorney-in-fact the ability to act on your behalf in a variety of situations. Think of anything that would require your signature to be legally binding and chances are that your attorney-in-fact would be able to sign for you. General powers of attorney typically provide the attorney-in-fact the ability to represent you in:
- Banking transactions
- Entering safety deposit boxes
- Handling securities transactions
- Buying and selling real estate
- Buying life insurance
- Settling claims
- Entering into contracts
- Filing tax returns
You may also afford your attorney-in-fact the abilities related to business operations and estate planning.
Generally, the only reason to consider a general power of attorney is if you will be unable to manage your own affairs for a period of time. Say, for example, that you’re traveling outside of the country for an extended period. Deploying military service members frequently appoint their spouses as their attorney-in-fact in order to handle transactions while they are abroad.
Special powers of attorney are much more limited: they only provide your attorney-in-fact the ability to do certain things on your behalf. Let’s say, for example, that you are retiring and moving abroad. Anxious to start your new life, you use your savings to purchase a small flat in Vienna. You might use a special power of attorney to allow someone to sell your current home for you. You might use a similar arrangement if you have rental property that needs to be managed while you are away. You could use a special power of attorney to allow someone to handle transactions related to managing the property.
The last common type of power of attorney is a health care power of attorney. In a nutshell, this document appoints an agent to make health care decisions on your behalf should you become physically or mentally unable to do make them for yourself. This document is sometimes compared to a living will, but the two vary in distinct ways. A living will provides explicit instructions regarding what sort of life sustaining procedures you wish to be provided in specific situations. A health care power of attorney may include guidelines but appoints an agent to make such discussions for you.
Any of these documents can contain a durability provision: a section that extends the duration of the power of attorney should you become mentally incompetent. In these situations, a doctor would need to certify that you were unable to soundly make your own decisions.
So, should you consider a power of attorney? That is a question best answered by a qualified legal specialist. Understand that a power of attorney will grant your attorney-in-fact a great deal of power. Make sure you appoint someone you trust to be able to make good decisions and to keep your best interests at heart. If the matter is only relevant for a certain amount of time, ensure that an expiration date is included in the document. In other words, if you’ll be traveling for a year, there’s no need for an indefinite power of attorney. Finally, make sure your power of attorney grants your attorney-in-fact the most limited set of powers necessary to represent your interests in the related matter. Sure, you should trust whoever you appoint to act on your behalf but why risk it?
Published or updated August 18, 2011.
