Powers of Attorney (POAs) are essential legal documents but they can be confusing for the layman not least because many people don’t understand that there are two main types of POAs and they function quite different from each other.
A healthcare POA allows someone you trust such as a family member or friend to make healthcare decisions for you in the event you are unable to do so yourself. A financial POA allows a similarly trusted person to make financial decisions for you also in the event that you are unable to do so yourself. While the documents are similar in name and function and they could conceivably allow the same agent to act in your stead, they are not interchangeable.
What they can do
A healthcare POA can decide what medical care the principle (that would be you in this case) receives including the ability to consent to giving, withdrawing or stopping medical treatments, services or procedures. That makes the person you choose someone who will have the ability to make life or death decisions for you. Not only should you choose carefully but you should make sure the person you grant this power to is willing to be your agent. Please read, Choosing your medical power of attorney.
A financial POA gives someone else legal authority to act on your behalf financially. That means your agent could conceivably use your assets to collect government benefits, pay your bills, or handle banking or other financial transactions (depending upon the power you give them). Please read, Choosing your financial power of attorney. One reason POAs are very important is that a signed POA releases banks, hospitals and other parties from claims against them if the decisions of the POA appear legal and legitimate.
Why choose a POA?
You are legally responsible for the acts of your agent. That makes the POA both very powerful while also leaving you open to its abuse. With all that power, your choice of POA could cause you financial ruin or even in the case of a health care POA cost you your life so why choose one at all? The answer to that is that you have the ability to choose who you want. If something should happen to you and you would suddenly be unable to make financial or medical decisions for yourself and you had no POA giving that right to someone else the courts could be forced to appoint a guardian to make those decisions for you. That’s a lot of power to give to someone you may not know or trust whereas making your own choice allows you to customize your POA to fit your situation.
Things to remember
Powers of attorney end. They can end for any number of reasons including that you change your mind (as long as you do so while you still have capacity) or your agent changes their mind but one way that they end that people may forget is that they end when the principle dies. That means that your agent cannot handle your decisions for you after you’ve died. He or she cannot pay for your funeral arrangements, pay off debts, or transfer property to beneficiaries. They can also end if a court invalidates your document believing you were a victim of fraud or undue influence.
Banks, the IRS and some financial institutions often require special forms of their own in order for someone else to act on your behalf.
You don’t have to have a lawyer to draw up a power of attorney but a lawyer can help spot potential problems and help you understand the risks and obligation inherent in a power of attorney. He or she can also help you to understand what will occur if a conflict occurs between your agents if you decide to choose more than one. A lawyer has a built in interest in determining that you get a document appropriate for your situation whereas a legal form from the stationary store has no interest at all. Get the proper guidance so that you’ll have the proper tool for the job.