Creating a Power of Attorney – Financial Readiness
A power of attorney, or POA, can be an important part of your estate plan. Your POA gives the person or institution you name the legal authority to act on your behalf. You can make your power of attorney as general or specific as you need, depending on your circumstances. Powers of attorney can be special, general, durable and springing or a combination. Take the time to learn more about the different types of POAs, so you’ll be ready if you need to put one in place.
General Power of Attorney: A general power of attorney gives the person you authorize, also called your agent, the power to handle your affairs. The general POA typically covers a wide spectrum of tasks that your agent may perform on your behalf.
When you set up your power of attorney, you should choose a person you trust as your agent, because you are giving that person authority over your finances. A POA doesn’t require regular oversight and an agent could misuse that power. If you have a concern, you can require in your POA that your agent report to another person about financial transactions they make on your behalf.
Powers authorized by a general POA are virtually unlimited in nature and include the ability to act in matters including:
· Buying and selling real estate and personal property
· Managing your banking and investments
· Collecting debts and borrowing money
· Operating a business
· Handling taxes and lawsuits
· Applying for government benefits
You can also set up a special power of attorney, that narrows the choices your agent can make and allows you to set up multiple agents for specific tasks. For example, you might designate your spouse as your health care power of attorney but choose your father to make financial decisions if you become incapacitated.
As a service member, when you deploy, or if you are physically or mentally unable, you may ask your spouse, another family member or a trusted friend to act as your agent. They would assume power of attorney to handle your affairs until you return or until such time as you are able or until you change, revoke or update your POA.
Limited Power of Attorney: The limited power of attorney allows you to name an agent to act on your behalf only in specific situations. It contains language that authorizes one or a few acts, often related to a specific event. Examples might include: Permitting your agent to sell your motorcycle and sign the title over to the new owner during your deployment or signing loan papers for you while you are on a temporary duty assignment. Once the time is up or the task is complete, the limited POA is no longer in effect.
Durable Power of Attorney: A durable power of attorney allows you to plan for incapacity, because it allows your power of attorney to remain in effect if you become mentally incapacitated. However, it also gives your agent effective powers when you’re not disabled. You may want to consider including wording in your POA that states the durable power of attorney does not apply unless a doctor finds you mentally incompetent.
Springing Power of Attorney: The springing or conditional power of attorney is a type of durable power of attorney that only takes effect if you are incapacitated or mentally unable to handle your affairs. Your legal advisor will probably recommend that you include language in your springing power of attorney that describes your definition of what you consider to be incompetence or incapacity. Often it will be a doctor’s decision or even agreement by two physicians that you are unable to handle your affairs.
Terminating a Power of Attorney
Make sure you understand the steps needed to cancel or revoke your POA, if you no longer need it. Typically, you will notify your agent in writing that you are terminating the power of attorney. You can also create a new power of attorney, naming a new agent. Be sure to check with the legal assistance office if you have any questions.
Setting up a power of attorney is not difficult, but make sure to seek legal advice so you can determine the option that makes the most sense for you and your family. Take advantage of the no-cost assistance available at your legal assistance office as you create your estate plan, set up your POA, review your will or trust , and update or change any of your estate documents.
You may want to review FINRED’s Estate Planning for Service Members, an online webinar that provides overview information about estate planning. Other good sources of information include the FINRED estate planning blog and estate planning fact sheet for more details. Military OneSource also offers helpful articles and information on estate planning topics.
Don’t wait — start today. Make a commitment to your peace of mind and well-being, and schedule your no-cost appointment with your installation’s legal assistance office to start creating your estate plan.