What’s in a Power of Attorney?
When the topic of estate planning arises, the term “power of attorney” inevitably comes up. However, few people are aware of the multiple types of this legal arrangement you can enter, much less the nuances that separate them. Additionally, a power of attorney (POA) can serve purposes outside of estate planning, such as in business deals and real estate transactions. Here we’ll delve a little more deeply into this commonly used, and misused, legal term.
At its core, a power of attorney allows one individual to act in another person’s stead. The scope of this ability, however, is limited by the nature of the power of attorney. You can choose an option that gives someone virtually unlimited access to make decisions and settle affairs on your behalf, or you can narrow that focus drastically so the person can only represent your interests during a set time/place. Rather than download a ready-made draft online, having an experienced attorney guide you can help ensure you execute the desired type of power of attorney and avoid any misunderstandings or undesired outcomes in the future. An experienced attorney can also clarify the differences between the following types of power of attorney.
The first, and most commonly thought of, kind is a general power of attorney. This is the broadest definition of this term, and basically “gives your agent broad powers to act on your behalf, including managing all your financial transactions, signing documents, settling claims, operating your small business and any other financial duties you specify.” This is great if you want a hands-off relationship with your affairs, and you have someone you can trust completely with the position. To learn more about this specific topic, visit https://www.araglegal.com/individuals/learning-center/topics/planning-your-legacy/importance-of-power-of-attorney. Typically, this type of arrangement ends if a person passes away or becomes medically incapacitated. That way, should you choose, you’re of sound mind and body to monitor your affairs and retract the power of attorney, if need be. In this sense, a general POA, is often a non-durable contract, made to have a specific end point.
At the other end of the spectrum, there’s the durable power of attorney, which as its name would imply is made to last. Traditionally, this is the type involved with estate planning as it kicks in either before or after you become unable to manage your own affairs. If you have this in place before anything happens, you can avoid the messy legal complications that often arise from a court-appointed guardianship. Ultimately, you know the person you want to be in change will have control, and you prevent people from fighting about it (judicially, anyway) after the fact. While this may last through any medical hardships you endure, this form of POA automatically terminates in the event of one’s death. If you’d like the same person to continue management of your estate, then he/she needs to be named executor of the will. This is a separate, albeit related, legal document that needs to be drawn up by a legal professional in advance. However, as mentioned previously, a power of attorney has many uses outside of medical and final preparations.
For example, you can assign a tax power of attorney that only authorizes someone to communicate with the Internal Revenue Service (IRS) on your behalf. For those of us who aren’t accountants, CPAs, or general tax attorneys, this can be especially useful. It’s also a fairly easy procedure (for now) that requires filing a specific form with the IRS. Moreover, it only applies to an individual’s or business’s dealings with the IRS, not to any other financial or commercial situations. For small business owners, this can be a strategic legal arrangement.
Another option that allows people to manage multiple endeavors effectively is a limited power of attorney. With this option, you can assign an agent to sign documents, handle banking information, or even complete a real estate transaction in your stead. This is especially useful for individuals who work remotely and participate in commerce in various states or countries. By restricting the scope and duration of this POA, you can ensure that you retain utmost control. Nevertheless, your agent should be a trusted one. After all, their actions are legally your actions. Find out how this agreement can both benefit and compromise your position here: http://smallbusiness.chron.com/can-poa-business-account-80535.html.
Having the foresight to prepare a power of attorney is merely one piece of the puzzle in both your private and commercial dealings. Choosing the correct option can mean the difference between success and discord. While you may be unfamiliar with these legal terms and their ramifications, the experienced staff at The Law Offices of Kirk Halpin & Associates are not, and they’re here to guide you to your ideal solution. So, don’t rely on Google for your estate planning, consult with our experts instead.