A Power of Attorney May Not Be What You Think

If you’ve ever considered planning for your future or helped someone with theirs, you’ve likely come across the term “power of attorney” (POA). But do you truly know what it means? Despite how important the words “power” and “attorney” may sound, a power of attorney isn’t what most people think. And no, it doesn’t give someone a temporary law degree!

In this blog, I’ll clear up some common misconceptions about powers of attorney so you can understand what it actually entails and what to do if you’re ever appointed as someone’s POA. With this knowledge, you’ll be able to confidently navigate your legal responsibilities and avoid any potential missteps.

What Is a Power of Attorney?

A power of attorney is a legal document that gives someone else the authority to act on your behalf when it comes to your financial life. Interestingly, the term “power of attorney” is a bit of a historical leftover. Initially, POAs were primarily used to appoint lawyers to represent individuals in legal matters. But today, the concept has expanded to allow anyone you trust to manage your financial affairs.

So, while you don’t need to appoint an attorney as your agent, the term has stuck around due to its legal roots. Essentially, appointing someone through a POA gives them the authority to act as your representative, much like an attorney would in legal matters.

It’s not that most people?want?someone else handling their finances, but there are times when it’s necessary – whether due to aging, an accident, illness, or simply because you’re traveling and unavailable. Without a trusted person managing your affairs, you could face serious problems, like unpaid bills, fraudulent transactions, or even property foreclosure. Having a POA in place ensures that someone can step in to maintain your financial well-being when needed.

Types of Powers of Attorney

There are different types of POAs, each designed for specific situations. Let’s take a look at some of the most common:

• General Power of Attorney: This grants your agent broad authority to handle all your financial and legal matters, even if you’re still capable of doing it yourself. For example, if you’re traveling for work and need someone to refinance your home while you’re away, this could be useful.
• Springing Power of Attorney: This type only becomes active if you become incapacitated or meet another pre-determined condition, like being unable to make decisions for yourself.
• Durable Power of Attorney: This is a type of general POA that remains in effect even if you become incapacitated. Think of it as combining a general and springing POA into one.
• Limited Power of Attorney: This grants authority for a specific task, like managing your real estate or handling certain healthcare decisions.
• Healthcare Power of Attorney: This specifically grants your agent the authority to make medical decisions on your behalf.

Regardless of the type, the agent’s authority under any POA ends upon your death.

What No One Told You About a Power of Attorney: It Ends With Death

One common misconception about POAs is that they continue to grant authority after the person dies. This isn’t true. A POA is a temporary arrangement that ends when the person who granted it passes away.

Let’s say your mother appointed you as her POA to manage her finances because she’s unable to do so. While she’s alive, you can pay her bills and manage her bank accounts. But as soon as she passes, you lose that legal authority. If your mother didn’t have a trust, or only had a will, you’d need to go through the probate court to gain access to her accounts again. This process can take time, and in the interim, unpaid bills could pile up – potentially leading to foreclosure or other financial hardships.

The Good News

The good news is that with proper planning, you can avoid the issues that come with relying solely on a power of attorney. One of the best ways to ensure continuity in managing your affairs is to create a?Life & Legacy Plan?with a?living trust.

A trust is a legal arrangement where your assets are transferred to a trustee, who manages them for the benefit of your beneficiaries. The key benefit? Unlike a POA, a trust continues after you pass, meaning your loved ones can continue managing your finances without interruption.

You may have heard about trusts online or from financial advisors who offer to draft one for you. However, a trust is more than just a simple document – it has legal consequences. Working with a professional estate planning attorney ensures that your trust and estate planning tools are correctly structured and updated over time, so you don’t leave your family with unexpected legal issues.

How We Help You Preserve What Matters

Understanding the limitations of a power of attorney and the benefits of a living trust is essential for protecting your assets and providing for your loved ones. At Cheever Law, we specialize in creating customized?Life & Legacy Plans?that are tailored to your unique needs and goals.

By working with us, you can rest easy knowing your financial affairs are in good hands, and your family will have ongoing support even after you’re gone. Whether you’re updating an existing plan or starting from scratch, we’re here to guide you every step of the way.

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Life & Legacy Planning Session. This will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.

To learn more about our one-of-a-kind systems and services,?contact us?or?schedule a no-obligation 15-minute introductory phone call?today.