Many people when they hear the phrase "power of attorney" consider it a scary term, something that comes up only in dire circumstances. The reality is much less harrowing. Power of attorney is essentially a practical legal tool, one that can reduce any future strain on your family and loved ones.
With that in mind, here's an explanation of power of attorney, including what it is, what it allows for, and when you might want to consider it.
What power of attorney allows
Power of attorney is a document giving an individual - someone you choose - power to handle your financial affairs on your behalf. This person is called the attorney-in-fact.
The attorney-in-fact is then authorized to use your finances to do things such as:
- Pay your mortgage
- Pay your other bills
- Manage your small business
- Pay and file your taxes
- Handle your bank transactions
- Manage benefits from Social Security or another government program
- Pay for everyday expenses of your family
The powers you grant your attorney-in-fact can be as limited or broad as you'd like.
When a power of attorney might make sense
There are a few different ways to handle power of attorney. For example, you can designate an attorney-in-fact at most any time to handle certain affairs. Or, you may want to consider a "springing power of attorney." This is when the responsibilities laid out in your power of attorney trigger only if you become incapacitated and can't take care of affairs yourself.
This does not have to be a permanent arrangement. You might want a power of attorney ready in case you're involved in a serious accident that requires a long hospital stay. Even if it's just for a few weeks, it might be easier during this time to have someone else handle financial affairs while you recover.
In addition, you can still choose to make these decisions on your own. You are not giving up control, just allowing someone else to make these decisions too. And as long as you are mentally competent, you can revoke a power of attorney at any time.
It can take stress off loved ones
If you become incapacitated and can no longer handle your affairs, and do not have a power of attorney ready, it will very likely mean loved ones have to go through the conservatorship process. That means a family member or other individual will have to ask the court to grant them some power over your financial affairs.
Not only is this more work for them, but it means the person you most trust to handle your affairs may not ultimately be the one in charge of them. Because of this, it often makes sense to prepare a power of attorney now, when you're healthy. That way everyone will be on the same page about what will happen and who will be responsible for your affairs if at any point you are incapacitated.
While considering the reality of life's uncertainty may be difficult, making power of attorney arrangements now means neither you nor your loved ones will be forced to worry about it at a later time. Everyone can have the peace of mind that comes with knowing you took care of these big decisions.