Powers of attorney are strong, legal documents that authorize another individual or group of individuals to act in your place and make decisions on your behalf. Commonly, people execute powers of attorney regarding their financial affairs; for their health, medical and personal welfare; and for other important legal decisions in the event they become incapacitated or unable to make these types of decisions for themselves.
For this reason, many people who are older in age, or who suffer from a terminal or life threatening illness or disability choose to sign a power of attorney. However…
A power of attorney can also be useful for young and otherwise healthy individuals!
Everyone over the age of 18 should consider executing powers of attorney in the event they suddenly or unexpectedly become ill, are involved in a bad accident, or are otherwise unable to make decisions for themselves, even if their condition is temporary. One of the first cases I handled as an attorney involved a 26-year old woman who had suffered a brain aneurism. Because this woman did not have powers of attorney in place, her family struggled with the red-tape involved in trying to handle her financial affairs at the same time they were trying to deal with their own grief at her condition. Our loved ones can be saved a lot of trouble by making sure we have our affairs in order.
In addition, powers of attorney can also be good tools for financial and life planning, even if you are not incapacitated. For example, if you have assets you would like to be invested or interest(s) in real estate that you want to capitalize on or have protected, but you have no experience or knowledge in handling these particular financial matters, you can give a power of attorney to someone you trust who you believe can competently perform these tasks for you.
In California, the person who grants or signs a power of attorney is commonly referred to as the principal. The person to whom a power of attorney is given is known as the agent. Your agent will make the decisions you give them authority to make in the power of attorney.
Types of Powers of Attorney
While you can execute a power of attorney for virtually any action that you are legally able or obligated to perform, there are two common types of powers of attorney:
Financial Power of Attorney
If you want your agent to be able to make any and all financial decisions on your behalf, then you will sign what is known as a general power of attorney. This will permit your agent to pay your bills, file your tax returns, conduct transactions on your behalf, invest your assets, deposit money into your accounts, etc. If you only want to give your agent authority to make specific financial decisions or take only specific financial actions on your behalf, then you can sign a limited or specific power of attorney.
Advance Health Care Directive
Another common power of attorney is an advance health care directive (sometimes known as a medical power of attorney). This document will give your agent the authority to make decisions on your behalf regarding your medical treatment and other decisions related to your care, including hiring caregivers and admitting you to a hospital or care facility. Based on the language used in your health care directive, the document may become effective immediately or only in the event of your incapacitation.
In order to ensure that your health care agent knows what type of medical decisions you want made, it can be useful to provide some direction to your agent within your advance health care directive. I usually caution against being too specific with these directions, however, because including a phrase that states “no breathing tube” may encourage your agent to decline that type of treatment even if agreeing to it for a temporary period of time might help save your life. Regardless of the directions you include in your advance health care directive, having a conversation with your health care agents about your wishes and your thoughts about quality of life and end-of-life care can be crucial (and are often helped with a glass of wine or two!).
What Makes a Power of Attorney Durable or Springing?
With either a financial power of attorney or an advance health care directive, your agent will have authority to act on your behalf in matters specified in that document from the time you sign the document (unless you specify that the agent's authority does not start until the occurrence of a specific event or time) until the time stated in the power of attorney. If no time or event is specified for termination, then the power of attorney will be effective even if you become incapacitated and up until the moment you pass away. This makes the power of attorney a durable power of attorney. A durable power of attorney contains language that its powers are effective even after you become incapacitated.
If you do not want your power of attorney to be effective immediately, you must explicitly state that in the power of attorney. This is what is known as a springing power of attorney. By designating that the power of attorney does not become effective until a certain date or time, or upon the occurrence of a certain event (like your incapacity), your agent will not be able to act until the time when the power of attorney “springs” into effect.
Usefulness of an Attorney
As you can see, there are numerous types of powers of attorney that can be used for a range of different purposes and that can start and end at a variety of different times. In order to be legally binding and effective, your power of attorney must be executed properly and contain the required language necessary to accomplish your goals.
For this reason, you should always hire a knowledgeable estate planning attorney to draft your power of attorney for you and ensure the required legal formalities are followed.
If you or a loved one would like to execute a financial power of attorney or an advance health care directive, or have questions regarding any other estate planning matter, contact Rebecca Gardner, Esq. at HMS Law Group, LLP. She has 15 years of experience representing clients in all types of estate planning issues, and is here to help you!