Life can throw unexpected curveballs — sudden illness, accidents, or other incapacitating events that leave you unable to make important legal, medical, or financial decisions. Without proper planning in place, your affairs could be left in limbo.
So what’s the solution? Having a power of attorney set up before you actually need one. But when should you get the ball rolling on creating a POA document? Let’s first quickly go over what a power of attorney actually is.
A POA allows you to legally appoint someone to handle matters if you become unavailable or incapacitated. The person creating the POA is called the principal. The principal names an agent or attorney-in-fact in the POA who can act in their place. Depending on the principal’s wishes, the agent can be given broad authority or limited powers.
POAs can cover financial, legal, medical, and other personal affairs. They can be effective immediately upon signing or only if the principal becomes incapacitated. Some types of POAs expire after a set timeframe, while durable POAs remain in effect indefinitely.
Having a POA in place before an emergency arises can prevent complications. The pre-determined agent can swiftly manage the principal’s affairs without court intervention. But when exactly do you need to create one? Here are five situations where a POA is essential.
One of the main reasons to have a POA is if you cannot make your own medical decisions. If you become seriously ill or have an accident that prevents you from communicating, someone will need to make essential healthcare choices for you. A medical POA allows you to name an agent who can:
- Access your medical records;
- Consult with doctors; and
- Consent to treatments or procedures if you are not able to do so.
Without a POA, your family may have to go to court to get guardianship over you just to make medical decisions. Having a medical POA already in place helps avoid this legal process during a difficult time.
If you travel extensively for work or have other reasons you may be gone or hard to reach for an extended period, POA can allow someone to handle matters in your absence. Examples where this can help include:
- Active military personnel deployed overseas;
- People who travel abroad frequently for work;
- Someone on a long vacation or sabbaticals, or
- Someone fulfilling a religious mission or volunteering overseas.
Granting POA access in your absence allows bills to be paid, investments to be managed, and other business affairs to continue uninterrupted. It prevents any legal or financial problems until you return and can resume control.
For business owners and those with financial stakes in companies, having a power of attorney is critical in case illness or injury makes you unable to handle your duties. With proper legal authorization, your interests could be protected if you suddenly are able to participate in important business decisions or company operations.
Suppose you own real estate with business partners. In that case, if you sit on a board of directors or have a substantial ownership stake in a business, granting POA allows you to designate someone you trust to step in on your behalf if you become incapacitated. This protects your business and investments, knowing your business can operate smoothly no matter what happens to you personally.
Real estate transactions require signing lots of paperwork and making quick decisions, which would be impossible if you became seriously ill or disabled right before a sale or purchase. Appointing a real estate POA allows your agent to:
- Sign contracts;
- Sign mortgages; and
- Sign other documents on your behalf.
Whether you are selling your home due to downsizing or relocation or hoping to finally purchase a dream home, having a POA safeguards these major financial transactions.
As people age, many choose to assign POA to trusted family members or friends in case declining physical or mental health makes them unable to manage their affairs at some point. Creating a POA is an essential part of estate planning for seniors to prepare for a time when they may not be able to:
- Manage finances;
- Give informed medical consent; and
- Perform important administrative tasks.
The person you appoint to be your agent under the POA has a lot of responsibility, so choose someone you trust implicitly — usually a close family member or friend. Choose an organized, responsible agent who shares your values and priorities.
Consider naming a designated agent in case your first choice becomes unavailable. Also, you can designate different POAs for different purposes, like medical decisions versus financial or legal ones. An estate planning attorney can help weigh your options.
While state laws differ, you must sign a written document as the principal in the presence of adult witnesses and a notary public to create a legally binding POA. Requirements like recording the POA with your county may also apply.
Since a POA allows your agent to make major decisions on your behalf — specify in detail the precise authorities being granted and any limitations you want to impose. An attorney can draft a customized POA tailored to your needs, or you can use templates for your POA document as a starting point. Just make sure your POA complies with your state laws.
Having a power of attorney set up before you need one is a wise move. You can relax knowing that your hand-picked agent will adequately manage your medical, financial, business, real estate, and personal affairs as life brings unexpected events.
Don’t wait until an emergency strikes to have a POA in place. Be proactive and gain peace of mind. With the proper POA ready to be activated, your interests and wishes will be protected even when you can’t act for yourself. Consult an attorney and take control of your future with a power of attorney.