Three things everyone should know about a Power of Attorney
On a broad level, a power of attorney is a legal document that gives someone the authority to act on your behalf. For example, a financial advisor might ask you to sign a power of attorney, giving them the authority to invest your money for you. Or you might also need to sign a power of attorney if you are buying or selling a house, have to go out of town, and require someone else to sign the documents for you.
Specifically, in the context of estate planning, a power of attorney usually means a document that lets someone manage your finances for you in the event you can’t manage them yourself. There are a few things to keep in mind when you are signing this form.
First, a power of attorney can be “springing” or “effective immediately.” “Effective immediately” means exactly what you think it means: the person you name as your agent has the power to access your finances as soon as you sign. Typically the people who choose this option are older and either can’t stay on top of their bills or don’t want to. “Springing,” on the other hand, does NOT give your agent this power until certain conditions are met – usually, one or two doctors have to sign a document stating you are incapacitated and unable to manage your finances. This is a good option for anyone who wants to use the power of attorney as a “just in case” document.
Second, a standard power of attorney grants your agent power over pretty much everything in your name – in other words, your agent can do anything you can do with your house, bank accounts, credit cards, etc. If you’re not comfortable giving someone that much power, you can limit what they can access or what they can do. For example, the financial advisor’s power of attorney would only give them the authority to invest the money you give them, and they would likely be limited as far as what they can invest in on your behalf. A power of attorney for real estate would also be limited – in many cases, the form will allow you to specify what property the agent has the authority to buy or sell in your name. Just remember, the estate planning power of attorney does not have these limitations unless you put them there.
Finally, you want to make sure you choose your agent carefully. Stories of people abusing this power are all too familiar, so your agent must be trustworthy, responsible with their own money, and wouldn’t see your money as a jackpot they can use to benefit themselves.
If you have more questions about powers of attorney or would like help creating one, please feel free to contact me at kaway@kawaylaw.com.
Kelley Way was born and raised in Walnut Creek, California. She graduated from UC Davis with a B.A. in English, followed by a Juris Doctorate. Kelley is a member of the California Bar and an aspiring writer of young adult fantasy novels.