One signature could control your whole life.
Reality take can take a turn for the worse when you least expect it, putting you or your family in a position where help is needed to make decisions that are going to have significant consequences for everyone involved.
Leaving important life decisions up to a verbal agreement is never a good solution. For anyone with a bank account, a power of attorney may be a necessity. Signing a document like a power of attorney may be intimidating, but it’s a reasonable agreement between you and someone you trust. Here’s everything you need to know about getting or removing power of attorney.
What is a power of attorney?
A power of attorney (POA) is a document that lets you appoint a person or organization to manage your financial or medical decisions on your behalf if you aren’t able to, due to sickness or death. This person or organization is called an attorney-in-fact or agent. POA is given to someone who you, the principle, can trust with your life. Literally.
“If you give someone a power of attorney, you give them a tremendous power to do whatever they want with your money or whatever it may be,” said Andrew Traub, an attorney in Austin, Texas. “It’s very important that you select the right people, and those are the people you can trust.”
The formal document, or plan, determines the amount of power the chosen agent will have in making decisions for you, your property, or both. The chosen individual takes full responsibility for the choices made under the power-of-attorney guidelines. This person is usually required to keep a record of financial transactions or medical decisions.
Anyone can be given the power of attorney, but common options are a spouse, relative, or a best friend. However, giving an agent POA makes it easy for them to misuse their powers, especially if the principle isn’t in the right state of mind to call the shots.
What does power of attorney do?
There are different reasons why someone would wish to get power of attorney, such as:
- Making financial decisions
- Buying life insurance
- Settling claims
- Operating business interests
- Protecting or claiming personal or estate assets
- Making health or medical decisions, including the ability to withhold or stop medical procedures, treatments, and services
A power of attorney can be as broad or as specific as you need them to be. They can be limited to financial or medical decisions, for example. Traub says that the POA breaks down into two basic types.
“A financial power of attorney is a document that gives somebody else authority to transact business on your behalf,” Traub said. “Medical power of attorney gives people an ability to make decisions for you, usually when your not incapacity to make decisions for yourself.”
A general power of attorney gives broad guidelines to the agent holding the power to make decisions on the principle’s behalf. Under this type of document, the agent could make all decisions related to medical, financial, and business decisions. In contrast, a special power of attorney can only give specific powers to the agent when the principle isn’t in a condition to make big decisions. Think managing real estate and selling property.
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Why is power of attorney necessary?
Creating a power of attorney is a good idea if you have an estate or financial property you wouldn’t want in the wrong hands. If you’re unable to manage personal affairs, for whatever reason, perhaps because you’re stationed overseas, it’s helpful to have a POA to ensure your wishes are followed. Close family members or spouses are usually deemed an agent when a family needs to decide whether to keep the principle on life-support. That way, doctors won’t have the final say.
A power of attorney needs to be established when you are mentally stable enough to make the necessary decisions. It’s a good idea to get a doctor involved in the process if the power of attorney includes medical decisions. That way there’s proof of your mental status before and after the power of attorney is signed. Here’s some more general advice from Rocket Lawyer:
The process for obtaining a power of attorney varies depending on your situation and whether or not you are the grantor of the rights or the grantee. For a Power of Attorney form to be legal, the signer must be mentally competent, acting by choice, and with at least two witnesses present. Some states also require that your signature on your Power of Attorney form be notarized. Read more below to learn how to give, obtain or revoke power of attorney.
How to get power of attorney
The first step to getting a power of attorney is to contact a lawyer. There are certain requirements for obtaining a power of attorney for mentally unstable adults or minor children that would require a physician’s signature or a temporary form.
You can find power of attorney forms online, but Traub says to avoid online forms to avoid making mistakes with “catastrophic consequences.” That said there are plenty of good options online, like Rocket Lawyer, which offers specialists to help with your questions and provides vetted legal research.
The power of attorney goes into effect once it is signed. If you move to another state, you should consult with a local attorney to ensure your POA is still valid.
How to remove power of attorney
It is possible to take away the power of attorney, but it’s not necessarily easy, accord to Traub.
“It’s very important that people trust the people that are signing those documents,” Traub said. “If for some reason they need to revoke those documents once they are given, they have to actually find everybody that was given a copy of the power of attorney and send them a notice of revoking.”
In short: Before you sign your life away, double check you have the right person for the job. And get yourself a lawyer.
Editor’s note: This article has been updated for clarity.
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