When you create legally binding documents of any kind, you are taking action to accomplish a personal objective. The documents do not call the shots; you are using the documents to satisfy certain goals. With this in mind, we will explain some things about the legal device called the power of attorney.
General vs. Limited Power of Attorney
When you create a power of attorney, you have options. There are general powers of attorney, and there are limited powers of attorney.
The person granting the power of attorney is called the grantor or principal. The grantor names an agent or attorney-in-fact. This is the person who can act on behalf of the grantor.
With a general power of attorney, the agent has sweeping powers. In essence, the agent has no limitations. He or she can enter into all of the same binding agreements that the grantor can sign.
A limited power of attorney is somewhat self-explanatory. When you create a limited power of attorney, you are granting the agent limited power to act on your behalf.
You could give the agent the ability to conduct certain types of transactions on your behalf, or you could grant a limited power of attorney for a single transaction.
It would also be possible to grant a sweeping power of attorney for a limited period of time. You could allow it to go into effect on a particular day, and you could include a termination date. The duration of the power would be entirely up to you.
Durable Powers of Attorney
As estate planning and elder law attorneys, we frequently help clients create durable powers of attorney. With a durable power of attorney, you name an agent to act on your behalf in the event of your incapacitation. This type of power of attorney does remain in effect even if you become incapacitated.
You can decide when the durable power of attorney goes into effect. Since you do not know when or if you will become incapacitated, you would probably want the power of attorney to go into effect right away.
However, there is another option. In many jurisdictions you can create a springing durable power of attorney. This POA would only go into effect if you were to become incapacitated.
Incapacity Is Common
Durable powers of attorney are very important, because incapacity is quite common among elders. Approximately 45 percent of people 85 years of age and older are suffering from Alzheimer’s disease, and this is just one cause of incapacity.
If you do not execute durable powers of attorney, the state could appoint a guardian to act on your behalf, and you would become a ward.
Free Incapacity Planning Consultation
We would be glad to help if you would like to put an incapacity plan in place. Our firm offers free consultations, and you can request an appointment through this link: Indianapolis IN Incapacity Planning.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.