Variations on Power of Attorney: One Size Does Not Fit All
February 16th, 2017 by CLLB Law
While you never know when you might have to rely on someone else, there are ways you can prepare for the possibility. The financial power of attorney (POA) is the cornerstone to any estate plan. It allows a person (the principal) to give legal authority to someone else (the attorney-in-fact) to take financial actions on the principal’s behalf. There are many situations where having such a document and creating such a relationship is preferable to allowing one’s personal finances to languish. Of course, the planning needs of an unmarried, childless 21-year-old are likely not the same as a 65-year-old married couple with grandchildren, but powers of attorney are highly customizable.
Third parties cannot simply make financial decisions for someone else without being given legal authority. Imagine the chaos that would result if you were hospitalized and your best friend sold your car to pay your mortgage. While he may have had the best of intentions, maybe you would have preferred to keep the car or miss a few mortgage payments or sell a pricey piece of jewelry instead. Each person has ownership rights over their own property that no one else can interfere with unless granted the authority to do so. The other side of the coin is that if you are somehow incapacitated and have not executed a power of attorney, your personal business will go unmanaged until a court petition for guardianship is filed and granted.
The most typical time for a power of attorney to take effect is for an unexpected disability. Since anyone can suffer from a health emergency, a POA is a wise choice for any adult with income, debt, property, or dependents. Other useful instances include frequent traveling, extended traveling, or being deployed. A POA can – and should be – tailored to an individual’s goals. Limiting its application to address specific situations will avoid unnecessary complications. Common examples are restricting the attorney-in-fact’s authority to negotiating loan refinancing, buying or selling real estate, filing income tax returns, handling government benefits, hiring professional assistance, accessing safety deposit boxes, registering a vehicle, or buying life insurance.
Motivations matter. A principal who has tax concerns should have a differently drafted POA than one who has healthcare concerns. So, too, should a principal who is uncomfortable with the thought of giving up independence. POAs can be made “springing,” which means the authority is granted only upon a specified event, condition, or date. As an alternative, a POA can be made “durable.” There are advantages and disadvantages to each, which should be discussed with a lawyer.
If you want control over what happens to your personal affairs in the event you are incapacitated in some way, you should execute a power of attorney that accurately reflect your wishes. To make sure these documents are validly drafted and address your needs, it’s important to have a lawyer’s advice. If you have any questions about this topic, you can find out more by discussing it with one of the Indiana estate planning attorneys at Church, Langdon, Lopp, Banet Law. We have years of experience helping people, and we can help you. Based in New Albany, Indiana, we proudly serve communities throughout Kentucky and Indiana including, but not limited to, Jefferson County, KY; Floyd County, IN; Clark County, IN; and Harrison County, IN. Contact us by calling (812) 725-8224 or filling out our online form.