Why You Need a Power of Attorney

Dustin Hall |
Categories
Estate Planning

Despite its importance, many overlook the need for a POA until it’s too late. Ensuring you have a Power of Attorney is one of the ways you can safeguard your interests.

In this article, we’ll cover what a power of attorney is, the different types available, the benefits, and why it’s essential to include one in your financial and estate planning. 

What Is a Power of Attorney? 

A Power of Attorney is a legal document that grants an individual (known as the agent or attorney-in-fact) the authority to act on behalf of another person (the principal) in specified situations. The agent’s responsibilities can range from managing financial accounts to making healthcare decisions, depending on the scope defined in the document.1

The POA can be invaluable if you were to become incapacitated—whether due to illness, injury, or advancing age. Without a POA in place, loved ones may face lengthy legal processes to gain the authority to act on your behalf, often during stressful times. 

The key to a successful POA is choosing someone you trust implicitly and outlining clear guidelines for their responsibilities. 

Key Benefits of Setting Up a Power of Attorney 

Still not sure if a POA is the right move? Here are some key benefits that highlight why it’s such an important document for anyone, regardless of age or financial situation. 

  • Protects your interests during incapacity. Life-changing accidents or illnesses can happen without warning. A POA ensures that someone you trust is ready to step in and take care of business should you be unable to. Without a POA in place, your family might need to go through costly and time-consuming court proceedings to gain control over your affairs. 
  • Provides financial continuity. Bills don’t stop if you’re unable to manage your finances. A POA allows your agent to take care of essential responsibilities like paying your mortgage, managing investments, and filing taxes. This prevents missed payments, account freezes, or financial penalties during periods when you’re unable to oversee things yourself. 
  • Ensures healthcare decisions reflect your wishes. A Medical POA grants your agent the authority to make healthcare decisions that align with your preferences. Whether it's consenting to certain treatments or guiding end-of-life care, a valid Medical POA ensures your wishes are respected no matter what. 
  • Simplifies family dynamics. Choosing a POA agent in advance can prevent disputes among family members during emotionally charged times. By clearly designating a trusted individual, you reduce the likelihood of conflicts over who should make decisions. 
  • Enables flexibility for business owners. If you’re a business owner, a Special or Durable POA can be invaluable in ensuring your business continues to operate if you’re unavailable or incapacitated. Your agent can oversee business operations, sign contracts, and ensure continuity during periods of disruption.
  • Offers peace of mind. At the end of the day, having a POA in place provides peace of mind that your affairs will be handled according to your wishes. This confidence not only benefits you but also reassures your loved ones. 

Common Misconceptions About Power of Attorney 

Misinformation can leave many hesitant to establish a POA. Let's debunk some common misconceptions: 

  • “Only the elderly need a POA.” While POAs are practical for older individuals, they’re just as important for younger adults. Accidents and illnesses can happen at any age. 
  • "My spouse or child will automatically be able to act on my behalf." This isn't always the case—spouses and children need legal authority through a POA to make decisions for you. 
  • “POAs grant too much power.” POAs are highly customizable. You can specify the powers granted and even create time limits. 

Understanding the true role of a POA can help you see it as a tool for empowerment, not vulnerability. 

How to Get Started With a POA 

If you’re ready to establish a POA, there are five things you should do. First, evaluate your needs to decide what type of POA fits your specific situation. Consider whether you’ll need a General, Durable, Medical, or Limited POA. 

Then, choose the right agent. Your agent should be someone you trust completely. They’ll often have access to sensitive personal and financial information, so integrity is paramount. 

Third, you’ll want to seek legal counsel. While there are online templates available, it’s wise to seek advice from an attorney to ensure your POA complies with state law and aligns with your overall financial or estate plan. 

Next, you need to discuss your plan with all the people who need to know about it. Talk openly with your agent and any involved family members about your expectations, preferences, and any limitations within the POA.

Lastly, regularly review and update your POA because circumstances change over time. It's good practice to revisit your POA periodically to ensure it still reflects your current wishes and that your designated agent is still the best choice. 

Part of the Broader Plan 

A Power of Attorney isn’t just a legal document; it’s part of your broader plan to manage life’s uncertainties and protect your legacy. Whether it’s handling day-to-day finances, safeguarding your health decisions, or ensuring your business runs smoothly, a POA helps you stay in control even when circumstances may try to take that away. 

If you haven’t already, we strongly recommend getting started on creating a POA that suits your unique needs. It’s a small step today that could make a world of difference for you and your loved ones tomorrow. 

Need help aligning your financial plan with your estate planning goals? Get in touch with us! Together, we can ensure your financial future—and personal wishes—are preserved.

 

 

 

 

Sources

  1. https://www.investopedia.com/terms/p/powerofattorney.asp
  2. https://www.lawhelp.org/dc/resource/frequently-asked-questions-about-general-powe
  3. https://www.legalzoom.com/articles/what-is-a-durable-power-of-attorney 
  4. https://trustandwill.com/learn/limited-power-of-attorney 
  5. https://www.uchealth.org/today/what-is-a-medical-durable-power-of-attorney/
  6. https://www.legalzoom.com/articles/what-is-springing-power-of-attorney 

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.