There’s more to estate planning than arranging what happens to your assets after you’ve passed away. It also involves taking steps to protect those assets (and your loved ones) even while you are alive, especially if you’ve reached a point where you can no longer make your own decisions.
Power of Attorney Explained
A power of attorney is a legal document that gives someone else the power to act for you when certain conditions exist, such as illness, disability, or your inability to be present when certain legal documents are signed. The authority to make these decisions about your property and finances can be broad or limited, depending on your goals.
There are different powers of attorney that you can bestow, but they typically fall within the categories below.
Durable Power of Attorney
A durable power of attorney is one that remains effective whether you are cognizant or not. For example, you might wish to grant your daughter power of attorney over your finances simply because they are excellent money managers or you want to devote your attention to other things. It remains in effect even if you become incapacitated or cannot be located. This makes it a powerful estate planning resource: there is no need to involve the courts and your agent can both provide for your family’s financial needs and minimize the risk of loss. A durable power of attorney arrangement comes to an end when you pass away.
Springing Power of Attorney
A springing power of attorney becomes effective when a specified event occurs, such as a medical professional determining that you are disabled or mentally incapacitated. It differs from a durable power of attorney in that you must be physically or mentally unable to make certain decisions on your own.
General or Limited Power of Attorney
A general power of attorney gives your agent the authority to act in your name in practically all circumstances. A limited version only gives him or her the power to execute actions specifically noted in the agreement.
It is occasionally argued that a power of attorney is not necessary if you have a revocable living trust (RLT) in place. While RLTs have a valuable purpose, they only apply to assets that are transferred into them. A trustee may also not be able to perform certain financial obligations, such as filing income taxes. Financial powers of attorney make it possible to fulfill certain duties that are beyond the scope of a RLT trustee.
Like all aspects of creating a solid estate plan, setting up the best power of attorney situation for your needs and goals should be accomplished with the assistance of a qualified professional. For help in securing your future, call the Matus Law Group today. We’ll work with you to create a plan that matches your goals.