Reasons for naming a power of attorney
A power of attorney is generally appointed either for a specific purpose (for example, to sign a document when your cannot be present to sign) or as protection in case you become incapacitated or incompetent. If you should become incapacitated or incompetent and not have a power of attorney, no one can legally handle your financial and legal affairs. If a POA has been appointed, however, there will be no lapse in your ability to control finances or legal matters, as the agent will be able to act on your behalf.
The agent you name as your POA can be responsible for:
- Bill paying
- Banking transactions
- Investments, including the management or sale of any stocks or bonds
- Managing or selling real estate
- Managing insurance, including overseeing the payment of any premiums
- Preparing and filing tax returns
Types of power of attorney
There are three types of power of attorney. The main differences between these POAs is when they go into effect and when they expire.
- Non-durable power of attorney, which goes into effect upon signing and expires if/when you are declared mentally incompetent
- Durable power of attorney (DPOA), which goes into effect upon signing and expires when you die
- Springing power of attorney, which goes into effect upon a specific event, date, or condition (such as a declaration of mental incompetence) and expires when you die
What type of POA do you need?
For the purposes of estate planning and end-of-life planning, a durable power of attorney is generally recommended, as the POA immediately goes into effect upon signing and remains in effect even if you become incompetent or incapacitated. With a DPOA, there is no question about when the POA becomes effective (as there often is with a springing POA) and the agent may act on your behalf if you become incompetent or incapacitated (which is not the case with a non-durable POA).
Naming a POA through a legal website generally costs under $50, and can cost as little as $15. If you establish a POA with an attorney the costs may be higher, depending on your attorney’s rate.