A Power of Attorney Could Be Different Than You Expect
If you've ever thought about planning for your future or assisted someone with theirs, you've likely encountered the term "power of attorney." But do you truly understand what it means? The words "power" and "attorney" sound significant, but they might not mean what you think. In fact, there are plenty of misconceptions about what a power of attorney really is and the authority it grants. Spoiler: it doesn’t give anyone a temporary law degree!
In this article, I’ll clear up the common misunderstandings around powers of attorney, so you’ll be well-prepared if you’re ever appointed as one. With this knowledge, you’ll know exactly what your legal responsibilities are, helping you avoid mistakes or legal issues.
But first, some background: If a power of attorney doesn’t make someone a lawyer, why do we call it that? Let’s dive in!
What Exactly is a Power of Attorney?
A power of attorney is, in simple terms, a legal document that allows someone else to manage your financial affairs on your behalf. The term "power of attorney" is a bit of a historical relic. Originally, it referred to appointing a lawyer to act for you in legal matters. But over time, it’s evolved to include appointing anyone—attorney or not—to handle various aspects of your life when needed.
Even though the person holding power of attorney doesn’t need to be a lawyer, the term has stuck due to its historical roots. By granting someone this authority, you’re essentially appointing them as your agent to make decisions and act for you, much like an attorney would in a legal case.
Now, most of us don’t want someone managing our financial matters unless absolutely necessary. But there are times when it becomes essential—whether due to old age, a serious accident, illness, or even just an extended time away, like that year-long trip you've always dreamed of. In such situations, having a trusted person manage your finances can prevent serious issues from cropping up. Without someone acting on your behalf, you could face extra fees, unpaid taxes, fraudulent activity on your accounts, property foreclosure, or even a damaged credit score. To avoid these kinds of disasters, it’s wise to give someone the authority to step in and keep your financial affairs in order when you can’t.
Different Types of Power of Attorney
We won’t dive too deep into the details here (but if you’re interested in more specifics, stick around until the end where I’ll explain how to schedule a call with me). For now, just know that there are different types of powers of attorney, each serving a unique purpose. Here are a few examples:
- General Power of Attorney: This gives your agent broad authority to manage your finances, sign legal documents, and more—even while you’re still able to handle your affairs. It takes effect as soon as you sign it. For instance, if you’re traveling for work and need your spouse to sign mortgage refinancing documents on your behalf, this would be useful.
- Springing Power of Attorney: This allows someone to manage your financial and legal matters, but only kicks in once you're unable to make decisions yourself. You can create the document now, but it doesn’t take effect until it’s needed.
- Durable Power of Attorney: Similar to a general power of attorney, but it remains valid even if you become incapacitated. Think of it as a combination of the General and Springing Powers of Attorney.
- Limited Power of Attorney: This grants authority for specific tasks only, like managing property or making healthcare decisions, but not for anything beyond that scope.
- Healthcare Power of Attorney: This specifically allows your agent to make medical decisions for you when you can’t.
Even though each type functions differently, they all share one key aspect: the agent’s authority ends upon your death.
What You Might Not Know About a Power of Attorney: It Expires Upon Death
You might think that a power of attorney gives someone ongoing access to your financial accounts, but that’s not how it works. A power of attorney is a temporary authority that ends when the person who granted it passes away. So, what does this really mean?
Let’s say your aging mother gives you power of attorney because she can no longer manage her affairs. While she’s alive, you have the legal right to access her bank accounts and ensure her bills are paid on time. However, once she passes away, your authority ends immediately. If she only had a Will or no estate plan at all, you would need to file paperwork with the probate court and wait until the court grants you authority again.
During that waiting period, if you’re unable to pay both her bills and your own, you might face some tough decisions. For instance, if she still had a mortgage and you can’t afford both her payments and yours, the bank could start foreclosure proceedings, putting her home—and any equity you stood to inherit—at risk.
Probate can be a slow and frustrating process, and without proper planning, it can lead to serious financial consequences. The good news is, with Planning Session, you and your loved ones can avoid probate court altogether and maintain uninterrupted access to each other’s finances, protecting what matters most.
Here’s the Good News
With thoughtful planning, you can ensure your bills are paid and your assets are protected for your loved ones. The best way to achieve this is by starting with a Planning Session with a living trust. A trust allows you to transfer your assets to a trustee, who manages them for your beneficiaries. The key advantage? A trust remains active after your death, ensuring that your finances are seamlessly managed without interruption.
You might have seen ads online or had a financial advisor offer to draft a trust for you. It may even seem like creating a trust is a simple, low-cost process. However, before you decide to take that route, it’s essential to understand the complexities involved. A trust is a legal document with serious legal consequences, and even experienced lawyers find them more complicated than they initially appear. If you draft a trust yourself or work with someone who isn’t a specialized attorney, you could be putting your money and your family’s future at risk. Unfortunately, I see this all too often, and many of these DIY trusts aren’t worth the paper they’re written on.
You and your loved ones deserve the peace of mind that comes with knowing your power of attorney, trust, and other estate planning tools are properly created, regularly updated, and tailored to your specific needs.
When you work with me to start a Planning Session, I’ll provide you with the education you need to make informed decisions. You’ll fully understand how your plan works, and your family will have my ongoing support, even after you’re gone.
How We Help You Protect What Matters Most
Understanding the limits of a power of attorney and the advantages of a trust is key to safeguarding your assets. As your Personal Family LawyerⓇ Firm, we are dedicated to helping you start a personalized Planning Session that fits your specific needs and ensures peace of mind, no matter what life brings. With your plan in place, you can be confident that your wishes will be respected, your loved ones looked after, and your assets protected.
Ready to get started? Schedule a complimentary 15-minute consultation and take the first step toward a secure financial future: https://bit.ly/20westlegalmeetingscheduler
This article is a service of 20WestLegal LLC. 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. That's why we offer a Planning Session, during which you will get more financially organized than you've ever been before and make all the best choices for the people you love. You can begin by calling our office in Sudbury, Massachusetts today to schedule an Estate Planning Session and mention this article to find out how to get this $750 session at no charge.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.