Let’s get right to it and answer the question before getting into the details. A power of attorney is a legal action that offers someone else of your choosing to make decisions on your behalf if you’re unfit or under contract.
Its most common use is for people to have a go-to friend or family member to act on their behalf if they become sick or injured and can’t make decisions themselves. Power of attorney agreements are an essential part of the estate planning process and are usually connected to a will or trust fund.
There are different forms of power of attorney that are beneficial depending on the circumstances. One of the most common is limited power of attorney.
Limited power of attorney allows for someone else to make specific decisions on your behalf but is limited by restrictions set in place by you, the grantor. Limited power of attorney agreements are typically used while the grantor is still alive and mentally competent. Limited power of attorney can be useful in many situations but can also have limitations.
Let’s look deeper.
To create a limited power of attorney, you must fill out a legal POA form establishing your guidelines and restrictions for your chosen person, or agent. This may include a timeline, financial access and specific decision guidelines.
For example, if you’re going on vacation and want to grant someone limited power of attorney while you’re away, you would establish the timeframe of when you’d be gone. The time frame ensures the form will be revoked at the end date of the timeframe. You should also discuss specific responsibilities with your agent so they’ll know what to do in your absence.
In some cases, limited power of attorney is revoked after the grantor dies or becomes disabled. Most limited power of attorney forms aren’t used after the death of the grantor since they usually aren’t involved in estate planning.
Limited power of attorney is common in the entertainment industry as many talent agents use limited power of attorney forms to deposit checks on their client’s behalf. Many active military officers use limited power of attorney during long-term deployment so their expenses are taken care of.
Confirming the credibility of your chosen agent is crucial in protecting yourself and your assets. Ensure your agent is a trusted friend or relative that you know will make correct decisions for you.
This is especially crucial if your agent could potentially have access to your financial or medical information. You can also appoint multiple agents to be power of attorneys if need be. While multiple agents ensure more security, disagreements tend to be more likely.
Limited power of attorney template forms can easily be found online depending on your state’s guidelines. Make sure you fill out a state-specific form as each state has different rules for power of attorney.
Depending on your state, you may have to sign your form with witnesses or a notary public present. If you aren’t sure about your state’s guidelines, it’s always best to ask your attorney or financial advisor.
Depending on your situation, you may need to choose what type of limited power of attorney needs to be exercised. Here are the different types of limited power of attorney and how they’re used.
A springing power of attorney is activated following a specific event described by the grantor. This can include death, incapacitation or illness. Springing power of attorney is very common for military families, as the agreement is usually activated following deployment.
Springing power of attorney is usually included with a will or trust. If you’re using this method, make sure to clearly explain the exact circumstances needed to activate power of attorney.
Durable power of attorney allows your agent to maintain control of your requests after your death. This is less common with limited power of attorney forms, as most of them are non-durable. Durable power of attorney is closer to standard power of attorney and is ideal for those planning for medical treatments, cognitive decline or emergencies.
Non-durable power of attorney is revoked in the event of the grantor’s death or incapacitation. If you choose this option for your agent, ensure that your finances are in place and you have specific beneficiaries in place to control your assets after your death.
If you’re asking yourself if limited power of attorney is necessary, it helps to understand the qualifications. Before filling out a form, ensure that you have full knowledge of your finances and net worth so you can be fully transparent with your agent.
Full disclosure between you and your agent will allow for smoother planning and execution of your limited power of attorney process. Make sure that your agent and attorney have copies of any documents they may need to act on your behalf.
To grant or appoint limited power of attorney, you must be at least 18 and potentially be unable to make your own personal or financial decisions due to injury, illness, international travel or work contracts. Compared to standard power of attorney, limited power of attorney is usually temporary and has a set time frame.
After the timeline ends, the limited power of attorney is expired and no longer in use. As stated above, agents can be a friend, relative, employer or talent agent. The main qualification for your agent is to be a trusted person that you feel comfortable making decisions for you.
Establishing power of attorney ensures your assets will be taken care of in your absence. When establishing a financial plan for your future, having a power of attorney on top of an established will or trust fund will give you reassurance and security for your family.
If you’ve been asked to become power of attorney for a friend or family member, it can be an overwhelming decision to make as you’ll be responsible for someone else’s affairs. Before agreeing to become a power of attorney it’s beneficial to know the risks involved.
Depending on the agreement between you and the grantor, you may be responsible for their finances, property and other assets when the power of attorney is activated. While uncommon in limited power of attorney situations, agents are subject to personal liability and financial burdens if the grantor’s finances are mismanaged. This is especially true for agents that are spouses or children of the grantor as they may already be financially connected to the grantor.
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Grantors and agents must have full knowledge of legal responsibilities. Grantors should have detailed instructions for agents so there’s no confusion.
Depending on the wishes of the grantor, agents may be responsible for paying expenses, managing investments, filing claims or awarding funds to other beneficiaries. Broad descriptions of power of attorney responsibilities can lead to personal and financial problems for everyone involved. Luckily, limited power of attorney situations are normally low-risk and are temporary.
For help writing or understanding a power of attorney form, talk to your attorney or financial advisor. Overall, it’s always best to wait and have full knowledge of what you’ll be responsible for when agreeing to be a power of attorney.
A power of attorney form is a legally binding document meaning the grantor has the right to alter or revoke the power of attorney as long as they’re mentally competent. Financial, medical and personal situations can change anytime so it’s pertinent to keep your estate planning up to date in the event of emergencies.
Keeping up with your financial advisor is the best way to maintain regular knowledge of your finances and make changes to your power of attorney information. If changes need to be made, be sure to submit them in writing to be in full agreement with your former and new agent, your attorney and a notary public.
When deciding on establishing a power of attorney, you may have questions about qualifications, forms, guidelines and expenses. At NextGen Wealth can help guide you through filling out power of attorney forms and picking the type that will best suit your needs.Whether you’re planning for your retirement, future medical decisions, international travel or employment, we can assist you in filling out forms and answering questions. At NextGen wealth, we specialize in assisting recent retirees, hardworking money-savers and anyone who needs professional financial assistance. Contact us today to find out more about our services and learn more about the power of attorney process.
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