What Can a Power of Attorney Be Used For?

What Can a Power of Attorney Be Used For?

Power of Attorney

Power of attorney gives an individual the authority to act for another person in a specified matter, or for legal, financial and/or medical matters. 

A power of attorney is a legal document that gives someone, or an organization, of your choice, the authority to act in your place. Many people like to plan for “just in case” by assigning “durable” powers of attorney for their medical care and finances, in the unfortunate event they become mentally incapacitated in the future. A durable power of attorney compared to just a power of attorney means that the document is to stay in effect if you become unable to handle your matters on your own.

What a Power of Attorney Can Be Used For

A power of attorney can be used for an individual to give another person the right to do certain things for them such as sell property or assets, sign legal documents, make health decisions, or conduct financial transactions, to name some of the more common reasons people use a power of attorney. While there are a few exceptions, a power of attorney can give someone else the right to do any legal act that the principal could do themself.

General Power of Attorney

A general power of attorney gives broad powers to a person or organization. This person or organization  that acts on the principal’s behalf is typically referred to as an agent or attorney-in-fact. Depending on the principal’s directives, they may give another person or entity the power to handle financial and business transactions, buy life insurance, settle claims, operate business interests, make gifts, and employ professional help, to name some of the more common reasons principals give an agent general power of attorney. General power of attorney is often used in situations where the principal will be out of the country and needs someone to handle certain matters.

Durable Power of Attorney

In the unfortunate event a principal becomes unable to make decisions for themselves because of an illness or injury or other problem that incapacitates them, normal powers of attorney terminate. If a power of attorney is no longer going to be valid in such circumstances, it winds up not being very useful for people to plan to have someone act for them.This is why many people choose to assign “durable power of attorney”.

Durable power of attorney remains in effect (durable) even if a person becomes incapacitated. In terms of what is said in each form of documentation, the language and scope is typically similar except for special wording that states that the power survive’s the principal’s incapacity. A durable power of attorney can only be terminated under certain circumstances and with proper court proceedings. 

Even with the discrepancy between the two, most powers of attorney today are in fact durable powers of attorney, regardless of whether the term “durable” is used.

Be informed of American legal information and news with American Legal Care.

4 Authorities Granted by Power of Attorney

Typically, people don’t like to think too much about being unable to make their own decisions. But if you suffer a severe illness of injury, it is very possible that you will be in this position. As with all sorts of estate and legacy planning, it is important to make your wishes known. Giving power of attorney to another person (or persons) takes this concept a step further, as it allows them to act on your behalf in a legal and binding manner. Here are some of the typical applications that a power of attorney can be used for.

1. Applying for benefits

There are many ways to designate when a power of attorney takes effect. Generally, the two most common times are immediately upon execution of power of attorney documents, or when the principal can no longer make their own decisions. The principal is the person granting power of attorney, and the person receiving it is referred to as the agent. The principal may want the power of attorney to take effect immediately if they receive a negative diagnosis. If they specify that it takes effect when they are no longer able to make their own decisions, the agent may need to have physicians provide proof of this to back it up.

It is critical to understand that the principal must be of sound mind when granting power of attorney. If they are mentally incapacitated, power of attorney cannot be granted. It is, therefore, a foreword-thinking strategy by design. As such, an agent can work on the principal’s behalf to apply for public benefits such as Medicare or Medicaid.

2. Managing your business

If you, as the principal, are a business owner, you can grant power of attorney to your agent to run and make decisions for your business, including the buying and selling of assets.

3. Managing your finances

Power of attorney can also grant the agent the authority to manage the principal’s finances. This is a broad power that includes writing and cashing checks, collecting debts, and investing the principal’s money as they see fit, generally without oversight.

4. Pursuing legal action

An agent with power of attorney may also sue on your behalf, should the need arise.

It is important to note that regulations for powers of attorney vary depending on situations and states. It is always recommended that both parties review power of attorney documents with a lawyer before entering into the agreement, so they understand the responsibilities, the terms under which the power is granted, and the circumstances under which it can be revoked.