In the event you ever become incapacitated and unable to make decisions for yourself, who will be responsible for handling your financial and other matters? This is where having a power of attorney will prove critical. Because this document gives considerable power to another person to act on your behalf, it is important that you have skilled legal counsel assist with the drafting and execution of it. You can depend on the Estates & Trusts attorneys of SederLaw.
What is a Power of Attorney?
This legal instrument allows another individual, known as your attorney-in-fact or agent, to act on your behalf with respect to a number of personal matters. A power of attorney is especially useful for someone who – because of illness, diminished mental capacity, or some other reason – cannot make certain decisions for themselves. Your attorney-in-fact can access your bank and financial accounts, file your taxes, sell your house, and carry out many other duties you would otherwise be able to manage yourself.
A power of attorney should be considered an essential part of any comprehensive Massachusetts estate plan. If you become legally incapacitated and do not have a valid power of attorney, it will become exceedingly difficult to handle the above and other obligations, potentially risking your money, property, and even health.
Different Types of Powers of Attorney
There are two broad categories of issues people wish to handle with a power of attorney:
- Financial: these include banking, investment, property, tax, business, and related, and will be the primary focus of the information below
- Medical: this document allows an agent to make medical decisions on your behalf (it is known as a healthcare proxy in Massachusetts, and our attorneys can assist you with creating one)
You may wish to consider one of several powers of attorney, depending on your personal objectives and concerns:
- Durable. This is a common power of attorney that allows your attorney-in-fact to act on your behalf if you become mentally incompetent. It is called “durable” because it continues to operate even if the principal (the person who created the instrument) becomes incapacitated. Your agent’s powers can be broad or narrow in scope, and your lawyer can discuss which terms to include in it. A durable power of attorney remains effective until either you revoke it or you pass away.
- General. The general power of attorney grants broad powers to your agent. Your attorney-in-fact essentially becomes your legal representative who can pay your bills, conduct financial transactions, and more. Unlike a durable power of attorney, the general power of attorney terminates if the person who created it becomes incapacitated. Death and revocation also end it.
- Limited. As the name suggests, these are generally used to grant authority to an attorney-in-fact for a limited or specified purpose. For instance, you may wish to execute a limited power of attorney to have someone else sign a document, sell a piece of property, or conduct some other business while you are out of the country or otherwise away. These documents often contain start and end dates or may include terms that specify when and under what conditions they become effective and, later, terminate.
- Springing. These are similar to but less common than durable powers of attorney. Whereas both documents are effective during a period of incapacity, the springing power of attorney must define what level of incapacity will activate it. This usually requires a medical doctor to certify that the requisite incapacitation has taken place. In general, estate attorneys do not recommend this type of power of attorney and will suggest a durable power of attorney instead.
Steps to Creating a Power of Attorney
Before drawing up your power of attorney, you will want to carefully consider who will serve as your attorney-in-fact. This individual does not have to have any formal legal or financial training, but it is vital that you can trust this person with the power that you’d be granting him or her. Your agent’s decisions could impact your financial future and personal life in many ways, so have a serious conversation and make sure this individual is willing and able to serve in this capacity.
Your attorney will explain the various power of attorney options available to you and discuss what degree of authority you are comfortable allowing your agent to exercise. The power of attorney should be in writing and notarized. A financial institution might not rely on the power of attorney in the absence of a notary seal and signature, so be sure to take these steps.
The principal must have sufficient mental capacity to create a power of attorney. So if you are assisting someone with making one of these instruments, and you’re not sure whether this criterion has been met, talk to an attorney.
Once the power of attorney is executed, keep a copy in a safe but accessible place where loved ones can locate it if needed. You should also give a copy of it to your attorney-in-fact so that the individual is familiar with the instrument. Your lawyer can advise whether to give a copy to other parties at this point, such as financial institutions. These steps may not be necessary until later.
Contact Our Worcester Power of Attorney Lawyer
Powers of attorney are wonderful tools for allowing others to take care of your personal and financial business when you cannot. But because they grant significant authority to others, it is imperative that you thoughtfully consider who will serve as your attorney-in-fact. Once you’ve made that decision, we can customize a power of attorney that meets your objectives as well as the broader goals of your estate plan. Connect with our Estates & Trusts team today to get started.