Designating a power of attorney (POA) for your accounts serves several purposes. A POA can act on your behalf during a real estate investment transaction or make decisions regarding personal financial assets or medical care if you become incapacitated.
Explore different types of power of attorney, what they are used for, and how to get power of attorney for your assets.
What is a Power of Attorney
Power of attorney (POA) is an official legal designation that gives a specific person, called an agent, power to act on another person’s behalf. A POA authorization can apply to the full scope of your assets. You can also designate a POA for decision-making in limited areas such as medical care, investments, property, or wealth management.
Why Designate a Power of Attorney?
There are multiple reasons to designate a POA to manage your affairs. The most common is to set up a POA to make legal decisions on your behalf if you become incapacitated or pass away. In this case, your POA can act in your best interests and help your family avoid drawn-out legal proceedings in probate court.
You may wish to designate a POA to handle your real estate transactions. If you often travel or live far away from where you are investing, a POA can attend meetings, sign documents, and perform other tasks that make building your wealth simpler.
You may also designate a POA to handle your investments and enact wealth management strategies to grow your assets. Many people designate POA to a trusted financial advisor, which allows them to make financial decisions on your behalf.
How to Get Power of Attorney
To get a POA for your accounts, speak with an estate planning attorney or qualified business or tax lawyer. Working with a legal professional is important when designating a POA because it ensures that it meets all state and federal requirements. It also ensures your POA document uses appropriate language that allows your POA to conduct business on your behalf.
When selecting your POA, determine the scope of power to give to your agent. The three most common types of POAs are conventional, durable, and medical.
- Conventional: A conventional POA goes into effect when signed by both parties and remains in place until you cannot make decisions. Also known as a limited power of attorney, this is commonly used to designate a POA for an agent who will act on your behalf during business transactions, real estate investments, and investment decisions.
- Durable: A durable POA is a lifetime assignment of power. It stays in effect until you cancel it or pass away. You may designate this POA to a family member and ask that it go into effect when you can no longer make decisions for yourself.
- Medical: As part of your estate planning, you may assign a medical POA to someone who can make medical decisions for you. Typically, a medical POA is only triggered when an incapacitating medical condition occurs. With this type of POA, the agent can only make medically-related decisions.
When setting up a POA for your assets, you decide the parameters of power. Consider your needs and speak with your lawyer to craft a POA document that lays out the terms and conditions of the POA designation so that you can protect and grow your wealth.
