How and when a power of attorney becomes effective depends on the type of power attorney that has been executed. A power of attorney provides someone who has been designated as an “agent” or an "attorney-in-fact" the authority to act on your behalf, in compliance with the terms of the legal document. The power of attorney will identify the duties and responsibilities of the agent. The authority can become effective immediately, or only when a specific event occurs, such as your incapacity. One of the most important advantages of a power of attorney is that it does not require that you give up all of your ability to handle your affairs. Instead, it allows your agent to act on your behalf only when it becomes necessary and only to the degree necessary.
Different Types of Powers of Attorney
As with most estate planning tools, there are various types of powers of attorney – each with their own purposes. Depending on your needs, a power of attorney can transfer various levels of authority as well. For example, a General Power of Attorney allows your agent broad authority to act on your behalf. Whereas, a Limited Power of Attorney (sometimes called a Special Power of Attorney) only gives your agent the power to carry out specific tasks or act within certain limitations.
If you have what is known as a “durable” power of attorney, the legal document will remain in effect even if you become incapacitated. Any other power of attorney will automatically terminate if you become incapacitated. A durable power of attorney is a very common, very useful tool in estate planning. The most common types of durable powers of attorney are for financial and/or medical affairs. A durable power of attorney can be revoked at any time and for any reason. If copies of the power of attorney have been given to others, it is a good idea to inform them of the revocation. Typically, revocation occurs when a new power of attorney is executed, so you may want to provide those persons with a copy of the updated power of attorney.
A durable power of attorney for finances.
Also known as a financial power of attorney, a durable power of attorney for property is extremely helpful as it guarantees that a person you trust will have the ability to manage your finances for you. If you do not have this estate planning tool in place, your family will need to request the authority to handle your finances for you by a guardianship or conservatorship through a court. Court proceedings are generally very time-consuming and expensive. That burden would be borne by your loved ones. However, a financial power of attorney, if it is drafted in adequate detail, will avoid the need for the court process in most cases. You also have the flexibility to create a power of attorney that only becomes effective when two healthcare providers certify that you are incapacitated and no longer able to manage your own affairs.
A durable power of attorney for health care.
A Durable Power of Attorney for Healthcare can also be referred to as an “advance health care directive” or living will. In some states, like Nevada, these are two separate documents; in others the two are incorporated into one document. This type of power of attorney will allow you to choose someone to make your healthcare decisions if you are unable to. This authority can be general or broad, or it can only be used in certain situations, depending on your wishes. Usually this kind of power of attorney only becomes necessary if you are unable to make your own decisions about medical care, due to an accident, debilitating illness or advanced age. Unless you put your wishes regarding healthcare and lifesaving measures in writing now, those decisions may be left to strangers with no idea what your preferences may be. Most people choose either a spouse or adult child to serve in this capacity, but that decision is yours, so you may choose anyone you like to take that responsibility.
