While different individuals have different purposes for creating an estate plan, one of the most common purposes is to ensure that they can use their assets in time of need. A Power of Attorney is a document that gives one or more persons the right to act on your behalf if you are unable to do, and is usually part of a comprehensive estate plan.
A Power of Attorney allows you to give as much or as little authority to your agents as you wish. The authority can range from the limited right of your agents to pay your bills, to a sweeping authority for your agents to be able to make any and all financial decisions. Due to the scope of authorities that can be granted by a financial Power of Attorney, you must choose your agent carefully. Often, people choose a family member or close friend to be their agent, but you can choose anyone you trust with your financial decisions. If you are creating a Revocable Trust, it is prudent to keep in mind the ways in which a Power of Attorney can act in conjunction with, and also fill the gaps remaining from the Trust.
A Power of Attorney can be ‘springing,’ which means it becomes effective upon a triggering date or event, such as if you ever become incapacitated, or unable to make decisions for yourself. You also have the option of creating a Durable Power of Attorney, which becomes active immediately and continues to remain active upon incapacity. This type of power of attorney is often used by individuals that need their agents to have authority to make financial decisions if they are abroad or otherwise unavailable to make their own financial decisions. A power of attorney expires at the time of the creator’s death.
Spouses can create a common Revocable Trust, but the powers granted in a Financial Power of Attorney are personal to each individual, and need to be separate for each spouse.