One of the most potent legal documents is the power of attorney (POA). It grants authority to an agent to act on behalf of the principal.
In estate planning, a POA can authorize the agent to give directives for the estate owner’s health condition. It may also allow an agent to make financial decisions such as paying bills, making investments and selling property.
The types of powers of attorney
There are some limitations to what an agent can do on behalf of the estate owner. It all depends on the scope of authority granted. The scope defines the three types of POA:
- Durable: This is the most common type. It’s useful for estate planning because it generally continues to be effective even if the owner becomes incapacitated. The document should specify that the POA survives the owner’s incapacity.
- General: This type, which expires upon incapacity, gives the agent broad powers and lists all the activities that they can do. For example, financial business provisions may include answering questions for a financial planner and signing documents for a home closing.
- Limited: This applies to a specific act that an agent must do. An owner’s medical directive can be a do-not-resuscitate order. A single financial directive can be about selling a particular residential property.
Whatever type of POA an agent holds, the commitment to their fiduciary duty should be consistent. They must always act in the best interests of the owner. This should remind an owner to put a premium on reliability and transparency when choosing an agent.
Paving the way for your estate’s continuity
Adding a POA to an estate plan may ensure continuity in case something bad happens. Choosing the right type of POA will keep your agent in check. With a sound POA and a trustworthy agent, you and your beneficiaries can get assurance of greater protection for the estate.