Understanding a Power of Attorney: Why Every Adult Needs One
Life is unpredictable, and there may come a time when you are unable to make important decisions for yourself due to illness, injury, or incapacity. In such situations, having a power of attorney (POA) in place ensures that a trusted individual can step in to manage your affairs. A POA is a legal document that grants authority to another person, known as an agent or attorney-in-fact, to act on your behalf in financial, legal, or healthcare matters.
Without a POA, your loved ones may have to go through a lengthy and costly court process to gain the right to handle your affairs. This document is an essential part of responsible estate planning, providing peace of mind that your wishes will be honored if you become unable to make decisions for yourself.
What Is a Power of Attorney?
A power of attorney is a legal tool that allows you, the principal, to designate someone to make decisions on your behalf. The person you choose, known as the agent, can be given broad or limited authority depending on your needs.
POAs can serve various purposes, from handling routine financial matters to making critical healthcare decisions. They can be temporary, permanent, immediate, or effective only in cases of incapacity. Understanding the different types of POAs is key to choosing the right one for your situation.
Types of Power of Attorney
General Power of Attorney
A general power of attorney grants broad authority to your agent, allowing them to handle legal and financial matters on your behalf. This can include managing bank accounts, paying bills, buying or selling property, and making business decisions.
This type of POA is often used for convenience, such as when someone travels frequently and needs another person to handle their affairs in their absence. However, it typically becomes invalid if the principal becomes incapacitated.
Durable Power of Attorney
A durable POA remains in effect even if you become incapacitated. This makes it a critical tool for long-term planning, ensuring that someone you trust can manage your affairs if you are unable to do so. Without a durable POA, your family may have to go to court to obtain legal guardianship, which can be a stressful and expensive process.
Limited (or Special) Power of Attorney
This type of POA grants authority for specific tasks rather than broad control over your affairs. For example, you might create a limited POA to allow someone to sign documents on your behalf during a real estate transaction. Once the specified task is completed, the POA expires.
Healthcare Power of Attorney
A healthcare POA, sometimes called a medical power of attorney, gives your agent the authority to make medical decisions on your behalf if you are unable to do so. This is often paired with an advance healthcare directive, which outlines your medical treatment preferences, such as whether you wish to receive life-sustaining measures in certain situations.
Having a healthcare POA ensures that someone you trust will be responsible for making critical healthcare decisions if you are unconscious or otherwise incapacitated.
Why You Need a Power of Attorney
Avoiding Court Intervention
If you become incapacitated without a POA in place, your family may need to go through the court system to obtain guardianship or conservatorship. This can be a time-consuming and costly process, often requiring legal fees and court appearances. A POA eliminates this burden by granting authority to someone of your choosing in advance.
Ensuring Your Wishes Are Respected
A POA allows you to designate a trusted individual to act in your best interest rather than leaving these decisions to a court-appointed guardian. This ensures that your personal, financial, and healthcare preferences are followed.
Managing Financial Affairs During Incapacity
Without a POA, your loved ones may struggle to access your financial accounts or pay bills on your behalf. A financial POA allows your agent to handle tasks such as managing bank accounts, paying taxes, and overseeing investments.
Making Medical Decisions
With a healthcare POA, your agent can communicate with doctors, approve treatments, and ensure that your healthcare preferences are followed. Without this document, medical professionals may have to rely on state laws or hospital policies to determine who can make decisions for you.
How Does a Power of Attorney Work in New York and New Jersey?
To be legally valid in New York and New Jersey, a POA must meet certain requirements. The principal must be at least 18 years old and of sound mind at the time of signing. Additionally, the document must be in writing and signed by the principal.
State-Specific Differences
In New York, a statutory short-form power of attorney is available, making it easier to ensure compliance with state laws. Both the principal and agent must sign the document, and it must be notarized.
In New Jersey, POAs must also be signed and notarized. While witness signatures are not typically required, they may be recommended in some situations to provide additional legal protection.
Choosing the Right Agent
Selecting the right person to serve as your agent is one of the most important decisions when creating a POA. Your agent will have significant control over your affairs, so it’s essential to choose someone you trust completely.
Qualities to Look For
A good agent should be responsible, financially competent, and able to make sound decisions under pressure. Availability is another key factor, as managing someone else’s affairs can be time-consuming. Before naming an agent, always ask if they are willing to take on the responsibility.
Can You Have Multiple Agents?
You can appoint multiple agents to act on your behalf. If you choose to do so, you must decide whether they will act jointly (requiring them to agree on all decisions) or severally (allowing each agent to act independently). While having multiple agents can provide checks and balances, it may also lead to conflicts or delays in decision-making.
Common Mistakes to Avoid
One of the biggest mistakes people make is failing to make their POA durable. If a POA is not explicitly durable, it will automatically terminate if you become incapacitated. This can defeat the purpose of having a POA in place for long-term planning.
Another common mistake is failing to clearly define the agent’s authority. A vague POA can lead to misunderstandings, disputes, or even misuse of power. Be specific about what decisions your agent is authorized to make.
It’s also important to keep your POA updated. Major life events such as marriage, divorce, or the death of an agent may require changes to the document. Additionally, because state laws evolve, using an outdated POA form can lead to legal complications.
How to Create a Power of Attorney
Creating a POA involves several steps to ensure it meets legal requirements and reflects your wishes.
First, consult an estate planning attorney to ensure your POA complies with state laws and addresses your specific needs. Next, draft the document, specifying the type of POA, the scope of authority granted, and whether it should be durable.
Once the document is complete, sign and notarize it according to the requirements of your state. Finally, distribute copies to your agent, financial institutions, healthcare providers, and any other relevant parties to ensure they are aware of its existence.
Revoking or Changing a Power of Attorney
A POA can be revoked or modified at any time, as long as you are mentally competent. To do so, you must create a written revocation and notify your agent and any institutions that have copies of the original document. If you wish to change agents or update the terms, it’s best to create a new POA rather than amending an old one.
Final Thoughts
A power of attorney is an essential part of a comprehensive estate plan. It ensures that your financial and healthcare decisions are handled by someone you trust if you become unable to manage them yourself.
If you’re ready to create or update a POA, our experienced estate planning attorneys in New York and New Jersey can guide you through the process. Contact us today for expert advice tailored to your needs.
Mitchell C. Beinhaker, Esq. is a business lawyer and estates attorney who runs a solo legal & consulting practice representing business owners, entrepreneurs, executives, and professionals. Through his 30+ years of experience, Mitchell has handled business development, marketing, firm management, along with business transactional work for clients of the firm. He has extensive experience with corporate governance, commercial transactions, real estate, and risk analysis. Using his years of practical experience, he drafts contracts, negotiates purchases, and can manage outside counsel for any corporate situation. For business owners and executives, he creates and implements estate plans, along with succession plans to help companies continue for future generations.
Mitchell is the co-author of 10 Ways to Get Sued by Anyone & Everyone: the small business owners guide to staying out of court, available in paperback and kindle from Amazon.
If you need legal help with any of our services, contact our office for a free consultation. You can email us at info@beinhakerlaw.com. To learn more about Mitchell and his practice, visit beinhakerlaw.com.
Beinhaker Law and Mitchell C. Beinhaker, Esq. do not guarantee the accuracy of any information provided in this article. Its not to be construed as advice of any kind. Be sure to check with your local professionals before making any decisions.
