Hello World! Welcome Friends! Including a durable power of attorney as part of your estate planning is very important. A power of attorney is written authorization for someone else to act on your behalf. When would you want to place someone else in control of the decisions that affect you? Some examples would be as you get closer to the end of your life or if you are a member of the military.
Common Type of POA
There are several common types of power of attorney, and the most appropriate for you depends on your end goal:
- Durable: This becomes effective as soon as you sign it, and your principal or chosen representative will act on your behalf until you die. It is possible to rescind this as long as you can show that you’re competent. You can learn how to override power of attorney here.
- Non-Durable: Under this type of arrangement, your representative (or agent) loses their authority to act on your behalf if you die or become incapacitated. Instead of your chosen agent, someone else will be appointed by the court.
- General: This type of power of attorney allows your agent to do things for you such as handling bank transactions, paying your bills, and completing contracts. However, this POA also ends if you become incapacitated. It isn’t appropriate for end-of-life decisions.
- Special: This POA allows your chosen agent to make decisions on your behalf in specific ways, such as paying your bills or selling property. When the task is complete, the POA ends. Medical POA is one example of this. Sometimes known as an advance directive, this arrangement allows your agent to make decisions about surgical procedures, the release of medical information, and necessary treatment.
- Conditional: This authority is only effective if a specific situation, such as a medical condition or an overseas deployment, takes place. This power ends when certain events or conditions take place.
It’s important to understand the details of this legally binding document, so you avoid unwanted situations. For example, if you give a durable power of attorney to your spouse, he or she has the authority to make changes to your will that you may not want.
Multiple Agents
Sometimes, family members share the responsibilities associated with acting on your behalf. The pertinent tasks and duties are divided among the agents. When this is the case, each family member is appointed as a co-attorney-in-fact. Before setting up this arrangement, make sure that family members can work together well.
A legally-binding contract should be created to ensure that all parties understand their responsibilities and limitations. People in the Grand Canyon State like to draw up grantor retained annuity trusts in Arizona so that all members of the family reap the rewards. This also ensures that family members get along, and there is no confusion.
Authority to Gift Your Assets
One detail that is sometimes overlooked is the authority to give your assets away as gifts. This is very important when estate taxes are determined. If the appropriate language wasn’t included in the document, the IRS may challenge the gift status, and your loved ones could end up paying much more in taxes.
Before You Sign
Of course, there are some very serious risks involved when giving someone the power to make decisions that affect you and your property. Make sure you are very careful when choosing a financial advisor, attorney, and especially your principal. Before signing the power of attorney document, read it thoroughly, and always ask questions about any points that you don’t thoroughly understand.
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