A power of attorney is a legal document that grants authority to another person to act as your representative in specific matters. Generally speaking, there are four main types, and each functions in a slightly different way.
- A durable power of attorney is commonly used to allow the holder to make healthcare or financial decisions when a person lacks capacity to make his or her own decisions.
- A general power of attorney gives the holder broad powers to make business, medical, financial or legal decisions for another.
- A special power of attorney gives the agent power to make decisions in a specific area, like a particular business interest or a specific real estate transaction.
- A springing power of attorney takes effect upon a specified event, condition or date.
Medical Power of Attorney
A medical power of attorney allows an agent to make health care decisions on behalf of another if the power grantor is unconscious, mentally incompetent, or unable to do so. Having this document does not forfeit the right to give medical direction to your doctors when you are able to do it. It only springs into effect when you do not have that capacity.
Most professionals stress the importance of having both a living will and a medical power of attorney. A living will allows an individual to state their wishes in relation to life-sustaining medical treatments. This document, however, does not authorize anyone to make decisions for you, such as withholding medical treatment. Therefore, pairing a living will with a medical power of attorney document should provide the necessary guidance and authority for any situation.
Financial Power of Attorney
A financial power of attorney gives an agent authority to manage finances and property and to transact business on behalf of the power grantor. The agent has an obligation to make decisions based upon your preferences and the specific authority granted in the document. The agent may not override your wishes. In general, the agent has authority to do whatever you would do. For example, he or she could withdraw funds from bank accounts, buy and sell stock, pay bills, or cash checks according to the stipulations expressed in the power of attorney document.
Can I change my mind?
Powers of attorney may be revoked at any time, as long as the capacity to do so exists. A letter must be sent to the agent with notification that the appointment has been revoked. A copy of the revocation should also be sent to any person or institution that may have received notice of the original power of attorney for their records; otherwise, they may continue to rely on the document.
We encourage our clients to review their estate planning documents regularly in order to ensure that the language and directions are still accurate. We work with a number of highly qualified estate planning attorneys in the Denver metro area and are more than willing to provide referrals. Please do not hesitate to contact us with any of your estate planning questions.
Andrea L. Blackwelder, CFP®, ChFC and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with Wisdom Wealth Strategies.
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