Estate planning documents may not be the most exciting discussion, but understanding what you need to make sure your wishes are followed is essential for everyone, says NJ 101.5 in its recent post, “Understanding power of attorney documents.”
A power of attorney (POA) is a legal document that’s used to give a trusted friend or family member (known as the attorney-in-fact or agent) the authority to act on your behalf on financial or legal matters. You can specify the scope of powers, which can be very broad or limited.
You would typically use a POA if you need help with a single task, like requiring someone to represent you in a legal matter that you can’t attend to yourself. When that’s done, the agent’s powers automatically end. In addition, your agent can’t act on your behalf if you become incapacitated even though you’re not able to act for yourself.
Although there may be instances where this arrangement is preferred, a durable power of attorney (DPOA) is the right document to use when the agent’s powers need to endure while you are incapacitated. As an example, seniors might be concerned about their capacity diminishing over the years, so they designate a family member as agent in a DPOA to help them with day-to-day finances.
You can revoke a POA or DPOA at any time—provided you’re not incapacitated. If you are, the DPOA is still valid, and you no longer have capacity to revoke it. In all situations, your agent’s power stops upon your death.
A DPOA can give you and your family peace of mind that you have a trusted individual selected to handle your affairs in an emergency. This also saves time and the expense of a legal proceeding to get someone appointed to take care of your affairs.
Unless you specify otherwise, your agent’s powers are effective immediately upon execution of the document—although you are still able to manage your own affairs. In some circumstances, it is preferable for the agent’s powers to be predicated on a certain event, which is called a “springing” power of attorney. You might use a springing power if the agent is a non-spouse.
You can also name an agent for medical decisions, but this is usually done with a separate document in concert with a living will.
Reference: NJ 101.5 (August 22, 2016) “Understanding power of attorney documents”
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