A power of attorney is a legal document or contract that allows you to officially designate someone as your agent. Your agent, also known as an attorney-in-fact, can handle financial and legal matters on your behalf in the event that you become physically or mentally incapacitated. Because your agent can handle a wide variety of personal matters on your behalf including handling banking and credit issues, it is important that you choose the best person when you file your power of attorney forms.
Types of Power of Attorney
There are three types of power of attorney: durable, conventional and springing. The durable power of attorney contract gives your designated agent the right to handle business and financial matters like stock portfolios, bank accounts and real estate agreements on your behalf. It becomes effective as soon as you, the principal, sign the form and remains effective throughout your lifetime unless you revoke it. Conventional powers of attorney become effective as soon as they are signed and filed with the courts. The drawback to this type is that it becomes ineffective should you become incapacitated, the very reason that many people designate someone to handle their legal affairs. Springing powers of attorney only become effective after you become incapacitated and usually last throughout a life event such as a coma. You can revoke a power of attorney at any time.
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If your spouse is generally in good health and someone who you trust with your finances, you could assign that person power of attorney rights. You could always select a close relative as a substitute power of attorney. Military personnel often give their spouses power of attorney rights while they are away in combat. Doing so allows the spouse to handle military checks, pay bills and meet at-home living expenses.
Because your power of attorney agent will conduct regular banking and other financial and legal transactions on your behalf, consider choosing someone who lives close to you. The farther away from you the agent lives, the more likely it is that she will not be able to handle your pertinent business matters in a timely fashion. Someone who lives close to you will also be familiar with the local and state laws applicable to your personal business endeavors.
Consider appointing co-agents if you are not comfortable giving one person all of your power of attorney rights. A drawback is that bill installments, stock portfolio changes or property tax payments might be delayed if the co-agents do not agree on how a specific transaction should be handled and when. Depending on the nature of the transaction, if the co-agents cannot agree, they might have to go to court to resolve a matter. A way around this is to appoint one agent to handle all of your financial transactions and the other agent to handle all of your health care transactions.
Range of Authority
Not only do you have the ability to assign the type of power of attorney you want an agent to have, you can also identify the range of authority the agent will have. Assigning ranges of authority allows you to give rights by type to persons most capable of handling specific affairs. For example, you can assign an agent to file your annual taxes. You can assign another agent to sell your house or buy and sell stocks on your behalf. If you give your agent authority to conduct bank transactions, make sure that you sign authorization forms and signature cards with your agent at the bank.
Without a power of attorney, should you become incapacitated your family might have to ask the court to designate a guardian to oversee your financial and legal matters. For this reason, granting power of attorney while you have all your physical and mental faculties can prove to be a wise decision years later. Remember that with most power of attorney types you can conduct all of your own legal transactions unless you become incapacitated. Before you make a final decision on who to assign power of attorney rights to, connect with your lawyer. Make sure that you fully understand the legal range of power applicable to the type of authority you give your designated agent. Focus on choosing someone who is reliable, accountable and trustworthy.