Financial Power of Attorney vs. Medical Power of Attorney
Before you get a power of attorney, you should familiarize yourself with the common legal terms you'll find within that document. It's also important to know (1) the parties and procedures required to create a valid power of attorney, (2) your options concerning both the effective date and durability of your power of attorney, and (3) the differences between a financial and a medical power of attorney.
The Parties Involved
A power of attorney is a legal document wherein one person, known as the principal or grantor, grants certain powers to another person known as the agent or attorney-in-fact. The principal must have the requisite mental capacity at the time of signing in order for the document to be valid. Generally speaking, this means that the principal understood and appreciated the powers he was giving to the agent. It's also necessary that the principal executed (signed) the document of his own free will, which means he wasn't forced or tricked into signing.
Every agent in a financial power of attorney owes a fiduciary duty to the principal. A fiduciary duty is a legal obligation to exercise a high standard of care and to act only in the best interest of the principal. In many states, the agent will sign the power of attorney.
In many states, one to two witnesses must be present when the principal signs the power of attorney. While the witnesses do not need to read the power of attorney, they will need to sign it. Additionally, a notary public must be present when the power of attorney is signed. The notary public also signs the acknowledgment section on the power of attorney.
Types of Powers of Attorney
A financial power of attorney is used to give an agent the authority to make certain decisions concerning the finances and property of the principal at a time specified by the principal. A medical power of attorney, in comparison, gives the agent the authority to make decisions concerning the health care of the principal if the principal should become unable to make those decisions for himself due to incapacity or loss of ability to communicate.
Effectiveness and Durability
A power of attorney is considered effective once the agent's power to act kicks in. Depending on the language used in the document, that power may become effective immediately upon signing or it may be "springing," which means it doesn't become effective until the principal becomes incapacitated and can no longer make decisions.
A power of attorney is referred to as "durable" if it remains in effect even if the agent becomes incapacitated. Because a springing power of attorney only becomes effective upon the incapacity of the principal, all springing powers of attorney are durable. However, powers of attorney that are effective immediately upon signing may be durable or may be extinguished upon the incapacity of the principal. Durable powers of attorney are only extinguished upon the death of the principal or if the principal executes a revocation form, which is explained below. Note that if you give authority to your agent to conduct a particular transaction, the power of attorney is extinguished once that transaction is complete.
Financial Power of Attorney
When preparing your financial power of attorney, the first thing you need to decide is what powers you want to give your agent. If you want to give your agent the right to make decisions about all aspects of your finances and property, you would use a general financial power of attorney. However, you may also use a financial power of attorney to give only one or a few powers to your agent, such as buying or selling certain property. This is sometimes referred to as a special power of attorney. Generally speaking though, the financial power of attorney form itself will not be titled "general" or "special." The difference will be in the portion of the power of attorney document where the principal specifies the powers given to the agent. When you use an online service like TotalLegal.com to prepare your power of attorney, you have the option to select full authority for your agent or choose only certain powers that you want your agent to have.
You should also decide if you want your power of attorney to be effective immediately or if it will go into effect only if you become incapacitated. If your power of attorney becomes effectively immediately, you must also decide if you want it to be durable so that it remains in effect during your incapacity.
Medical Power of Attorney
Also referred to as a power of attorney for health care or health care proxy, a medical power of attorney gives the agent the authority to make decisions about the medical care the principal receives if the principal is unable to make his own decisions either due to incapacity or some other condition that prevents communication. By definition then, a medical power of attorney is both springing and durable. You can also use the power of attorney to name your agent as your conservator/guardian if a court proceedings of that nature are ever instituted. The principal may also use a medical power of attorney to designate people to have first priority in visitation and to give the agent to authority to consent to or refuse psychiatric treatment, to make advanced funeral arrangements, and authorize an autopsy.
However, it's important to not confuse a medical power of attorney with a living will, or advance directive. While a medical power of attorney allows the agent to make decisions about treatment when the principal is incapacitated, it does not allow the agent to make decisions about end of life care if the principal is in a permanent vegetative state. If you want to name an agent to make decisions such as withholding or continuing life sustaining treatment if you are incapacitated and terminally ill, you must also execute a living will. With TotalLegal.com, it's easy to create a living will when you create your medical power of attorney.
Choosing an Agent
An agent must be a mentally competent adult. Beyond that, the person you select as your agent must be someone you trust. Trust means different things to different people, and while every agent owes a fiduciary duty to the principal, when it comes to giving someone the power to make decisions about your finances, it's important that the person you choose is not only honest, but also has a history of making smart financial decisions for himself. Even someone who would never intentionally make bad financial decisions on your behalf, may have trouble making good choices about money in his own life and that should be a red flag that they'll have difficulties if tasked to do the same for you.
You may use your power of attorney to not only compensate the agent for his services, if desired, but also to authorize your agent to give gifts of your money and/or property to himself.
How to Revoke a Power of Attorney
If you execute a power of attorney and then decide that you no longer want your agent to have this authority, you may revoke the document. The principal can revoke a power of attorney at any time prior to becoming incapacitated. A power of attorney revocation form is a relatively short, straight-forward form that states the principal's name, address, the date of the power of attorney was executed as well as the agent's name. The form should be signed by the principal in front of a notary public.
After you execute a revocation of power of attorney form, the next step is to notify your agent that you have revoked the power of attorney and put him on notice that he is no longer authorized to act on your behalf. You should destroy all copies of your power of attorney. As a final measure, you should notify any person or business who is aware or has a copy of your power of attorney that it has been revoked. This includes banks for a financial power of attorney and your doctor when revoking a medical power of attorney. You may also provide them with a copy of your signed revocation form.