People are often confused about a power of attorney (POA) and are unsure what power it conveys to the individual you appoint to be your POA. They are even more surprised to learn that some people have multiple people serving as their powers of attorney, each in different areas of their lives.
So, what is a power of attorney — and do you really need one?
There are different types of POAs
Powers of attorney are crafted in different ways, according to the needs of their users. Commonly, you’ll see the following kinds:
- Limited power of attorney: These are very narrow and specific and may deal with the sale or purchase of a house or vehicle. If you have an investment portfolio, chances are good that when you opened your brokerage account, one of the many documents you signed was a limited power of attorney to allow your broker to make market transactions for you based on their information and current trends.
- Medical power of attorney: If you became incapacitated and were unable to make your own medical decisions. who do you want to make them for you? You may want someone other than whom the law designates, so it is very important to appoint this person officially as your medical power of attorney. This type of power of attorney “springs” into action when they are needed, not before.
- Durable power of attorney: These are permanent documents with no designated endpoint unless you revoke its authority by canceling it (or you pass away). Among other circumstances, they are useful in end-of-life situations when someone may need to manage your bills or other paperwork.
A POA is not a will
Powers of attorney are valid during your lifetime and expire upon your death. Therefore, your chosen POA does not automatically become your executor or the administrator of your estate. You will have to do additional estate planning in order to cover the most basic areas.