Power of Attorney
A power of attorney is a legal document that allows one person (the “principal”) to appoint another person (the “agent”) to make final decisions on their behalf. The power of attorney should be given to someone that you trust completely because they will have the power to make financial decisions on your behalf.
- A limited power of attorney gives an agent the power to act on your behalf for a very limited purpose. For example, a limited power of attorney could give someone the right to sign an important document or handle a financial transaction on your behalf if you are not available to do it yourself. A limited power of attorney ends at a time specified in the document.
- A general power of attorney is comprehensive and gives the agent all the powers and rights that you have. For example, your agent can open or close accounts, make financial donations, and pay bills. A general power of attorney ends when you die or become incapacitated unless you rescind it before then.
- A durable power of attorney can be general or limited in scope, but it remains in effect even after you become incapacitated. A durable power of attorney will remain in effect until your death unless you rescind it while you are not incapacitated.
- A springing power of attorney enables your agent to act for you the moment you become incapacitated, but no sooner. If you’re using a springing power of attorney, it’s very important that an asset protection lawyer clearly defines what the standard for determining incapacity is in the document itself.
By the time a caregiver realizes that the person they are taking care of has dementia, or diminished mental capacity, then they may no longer be able to give someone else power of attorney.
In this case, the caregiver would have to apply to the court for a conservatorship or guardianship. A guardianship is when the court appoints a person (the guardian) to have control over a person’s (or ward’s) finances. A guardianship is when a person (the guardian) is appointed by a court to have control over the care, comfort, and maintenance of another person.
The legal proceedings for these types of guardianships are usually time-consuming.
It’s always best to speak to an asset protection lawyer and your family members about power of attorney issues while you are still mentally competent.
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