There is a chance that at some point you might need or want another person to legally act on your behalf. For this to happen, a document called a “durable power of attorney” must be in place. The durable power of attorney allows someone else to make legal decisions about things such as your property and your finances.
A separate document called the “durable health care power of attorney” is necessary to allow someone else to make medical decisions for you if you are incapacitated.
What Is a Durable Financial Power of Attorney
Whether it’s out of convenience or necessity, the durable financial power of attorney is a document that allows someone else—called the “agent” or “attorney-in-fact”—to legally act for you—the “principal.”
Although a power of attorney is most common in the event of illness, disability, or an accident, it can be useful in any situation where the principal can’t be present to make a legal decision or sign a document. You can authorize your agent to exercise as much or as little power as you want. A general power allows the agent to do anything with your property, just as you could. A limited power of attorney grants the agent the power to take limited specific acts, such as sell one piece of property or open a bank account.
A durable power of attorney indicates that the agent will remain authorized even after the principal has become mentally incapacitated. In a standard power of attorney, the agent’s authorization would end once the principal becomes mentally incapacitated. All powers of attorney cease to be effective at the death of the principal.
How a Power of Attorney Works
A power of attorney is used to assign authorization to an agent under a variety of different circumstances, including, but not limited to:
- Making financial decisions (buying or selling)
- Managing business
- Collecting debts
- Filing lawsuits
- Settling claims
- Making medical decisions
- Investing money
The authorization can be put into effect immediately, can stay in effect for either a specified amount of time or indefinitely, and can be revoked at any time.
When choosing an agent, it’s important to consider the qualities of the person to whom you are giving authorization. Trust, responsibility, loyalty, and honesty are just a few that come to mind. You also want to consider the person’s ability to handle finances or the matter you are delegating to the agent.
Remember: an agent can be a family member, a close friend, or a professional. You will want to choose someone who has your best interests in mind and would handle your business the way you would handle it.
When you sign a power of attorney and give an agent authorization (regardless of whether it is limited or general) you are entrusting that person with extremely important decisions and, in some cases, access to your finances and/or property. To fully understand what you, the principal, are authorizing, it’s recommended that you seek legal advice prior to completing a power of attorney.
Furthermore, it’s important to note that the principal can act independently of the power of attorney once authorization is granted. A power of attorney does not revoke the principal’s power to make decisions. In fact, if the agent and the principal happen to disagree, the principal’s decision rules, given that they are not mentally incapacitated.
What Is the Benefit of Having a Power of Attorney
When a durable financial power of attorney and health care power of attorney are in place, if you become incapacitated, there will be no need for someone to seek a guardianship in order to make decisions and act on your behalf. To obtain a guardianship requires a court procedure and can be costly and time-consuming. You can avoid this process by thinking ahead and putting these documents in place.
It is never too soon to have these documents prepared, provided you are over the age of 18. Parents should think about what might happen when your child is away at school and someone is needed to make decisions on your child’s behalf. Children should think about who will be able to make decisions for your parents as they age. It is good planning to consider who you want to serve as your agents if the need arises, and to speak with your New Hampshire estate planning attorney about putting the proper documents in place.