You’ve probably heard of the term power of attorney before. This is a method where you transfer legal authority from one party to another.
This is an important step if you aren’t always available to sign a document or authorize a deal.
You have to think carefully about whom to choose as a power of attorney. You have to know the process of transferring power to another person.
You’ve also got to know the power of attorney rights and limitations.
This guide will teach you what is a power of attorney and the process of using one.
Let’s begin with understanding the types of power of attorney.
General Power of Attorney
This is the most common type of power of attorney. This gives another party a broad range of rights. The person who gets the power of attorney gets known as an agent or attorney-in-fact.
The rights will include buying life insurance, handling business transactions, employing professionals, settling claims, and much more.
This type of power of attorney gets used when one party is out of the country. If you are unable to sign a document remotely, you might want to ask someone to sign on your behalf.
This is often used for estate planning when you want to manage a property. If this is why you need a general power of attorney, make sure you learn the estate planning mistakes beforehand.
Special Power of Attorney
If you want your agent to have more privileges, this is called a special power of attorney.
Some of their responsibilities can include buying or selling real estate on your behalf. They can collect debts or make serious business decisions on your behalf.
Think of this as a ‘Vice President’ scenario. When the President is unable to fulfil their duties, the Vice President has the authority to take over.
The special power of attorney gets awarded when the main party has prior commitments or is unavailable. This is often used when the main party is having health problems.
Durable Power of Attorney
Many of us never consider needing a durable power of attorney. However, this is an insurance plan that you shouldn’t miss out on.
Let’s suppose you develop a serious mental illness due to an accident or other unforeseen circumstances.
Who will manage your assets and responsibilities if this happens? The responsible party is your durable power of attorney.
You can choose the responsibilities of this type of power of attorney. They can be a special power of attorney, a general power of attorney, or health care power of attorney. You might also have to state the name of a doctor who will assess your mental capacity.
If the doctor declares you mentally incompetent, the power of attorney becomes active.
Health Care Power of Attorney
This power of attorney has the authority to make medical decisions on your behalf.
This is one that you choose when you are mentally incompetent, unconscious, severely ill, or incapable of making independent decisions for any other reason.
In some jurisdictions, this is the agent who can keep you or pull you out of life support.
Choosing Your Power of Attorney
It’s up to you to choose who your agent should be. You can consult with a lawyer or financial advisor. You might have a friend or family member who advises you.
But the ultimate decision has to be yours. Arguments can ensue around who is the ideal power of attorney. But you have to choose your power of attorney and not care what others think.
So how do you choose the right agent for power of attorney?
You have to make sure this is someone you trust. You also have to consider the character of the person whom you choose. You also want to consider how responsible they are.
You might trust your sibling, for example. But is your sibling responsible when handling financial matters?
Are there any people in your life whom you suspect? Is there anyone who might abuse their power of attorney status? If your intuition tells you that someone cannot be trusted, don’t choose them as your agent.
What happens if your agent violates the rules? What happens if there’s any misconduct?
If an agent unintentionally makes a mistake, there isn’t any legal liability. Such protections get outlined in the power of attorney documents.
You want to speak to your lawyer about how to prepare these documents. You want to discuss how you can hold an agent liable if you believe there’s intentional misconduct.
It’s also wise to tell others close to you who your agent is. You can instruct these individuals on how to take legal action against your agent if there are any issues.
You can assign power of attorney to multiple agents. You can choose whether these agents should work on an individual basis or as a team for making decisions.
You have to consider the pros and cons of multiple agents for your situation. Multiple agents can work as a team to make better decisions on your behalf. They can create a “checks and balances” system as opposed to having a centralized authority.
The downside of this situation is that it might take longer for decisions to get made. There can be constant arguing and this can lead to a serious downfall for you or your business.
If you do choose multiple agents, it’s wise to choose people whom you know can work well together.
Multiple agents can also work as backup options. If one agent cannot perform their duties, another agent can take over as soon as possible.
What Is a Power of Attorney?
Now that you know “what is a power of attorney?”, you can make better decisions on whom to assign this authority to.
Take your time to do further research on the different types of power of attorney discussed in this guide.
You should also speak to others who have experience with a power of attorney. Ask them how they made decisions in choosing their agents.
Your lawyer will also help you understand the responsibilities that a power of attorney brings.
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