A power of attorney is a document that authorizes one person, known as the attorney-in-fact or agent, to act on behalf of another person, known as the principal, when the principal is unable to be present. In a California estate plan, two different types of powers of attorney are often used, one for financial issues and one for health care. If you are preparing your estate plan , you might want to consider these documents
What a POA does
The function of these documents in estate planning is to have someone in place to act on an individual’s behalf if the individual is incapacitated. This could be the case at a person’s end of life, but it could also happen simply because someone is seriously ill or injured.
POAs grant as much or as little authority as the principal wishes. In the case of a health care POA, having one is useful so that the agent can make decisions on behalf of the principal. A financial POA may only allow a very limited scope, such as permitting a person to manage their main bank account but not any other accounts or investments, or it could cover all of a person’s financial matters.
Durable or springing
You may also want to consider the pros and cons of a durable versus springing POA. The former is effective immediately while the latter is only effective once a person is incapacitated. The problem with the latter is that it may be difficult to determine what constitutes “incapacitated.”
POAs can protect you and your assets. They are important documents, but they also must be prepared and used with care because they are vulnerable to abuse. Choosing the right agent, whether a spouse, an adult child or someone else, is critical.