What is a Power of Attorney? It is an important, but albeit overlooked or misunderstand, aspect of an Estate Plan. Basically, it is a document that you sign to give someone else the power or authority to handle your personal affairs. There are three main areas of life that people create a Power of Attorney for; medical, financial, and minor children.
A medical power of attorney allows you to appoint someone to make medical decisions for you in the event you can not make them for yourself. A financial power of attorney allows you to appoint someone who can have access to your money and financial records and handle your money for you when you cannot. A minor children power of attorney allows you to appoint someone who can make decisions regarding your children in the event you can not make them for yourself.
Who may serve as your Power of Attorney?
Any person over the age of majority may serve. This includes spouses, children, distant family members, and friends. The same person may be selected to fill in as Power of Attorney for medical, financial, and minor children.
You may appoint people to act either individually or jointly. This decision is up to you and your understanding of how the one person will act alone or the two people will act jointly.
Are all Powers of Attorney the same?
No. There are three different “shelf-lives” for Power of Attorney; General, Durable, and Springing. A General, or Simple, Power of Attorney is valid as long as you have the capacity to handle your own affairs. After you lose capacity, your General Power of Attorney will also lose the ability to handle your affairs. When this happens, a court process will need to be initiated to have a Guardian and Conservator appointed over you.
A Durable Power of Attorney is valid as long as you wish it to and do not revoke it. Meaning, it remains in effect even after you lose the capacity to handle your own affairs. The reason Jeppesen Law prefers the Durable Power of Attorney is that if you become incapacitated, the person you appointed as either medical, financial, or minor child Power of Attorney retains this ability and a court case does not need to be opened to appoint someone to fulfill these positions.
Lastly, there is the Springing Power of Attorney. This does not even take effect until you have become incapacitated or disabled. Instead of sharing control with another person, the Power of Attorney is not authorized to act until you lose ability to manage your own affairs. Sounds great, right? Two problems.
First, how will a third party dealing with the Springing Power of Attorney know that they are attempting a valid act? Banks and other institutions, because of their liability to you, will not recognize your Springing Power of Attorney until they receive official notification from a court that you are incapacitated. The goal was to avoid initiating a court process, so the Springing Power of Attorney fails on that front.
Second, if you want to choose a Springing instead of a General or Durable Power of Attorney because do not trust the person you want to appoint, maybe you should consider someone else for the position. I recommend this, because once you are incapacitated or disabled, that person will not then become more trustworthy.
If you would like a quick breakdown of where and how a Power of Attorney fits into your Estate Plan, please read Understanding Basic Estate Planning Terms.
Schedule a conversation with Justin Jeppesen to take the first step towards creating your complete estate plan, with your Power of Attorney! With our Free Initial Consultation we help our clients explore their own situations and plan for their futures. If you have more questions, we'd love to help! Contact Jeppesen Law now: (208) 477-1785.