Tuesday, September 4, 2012

Legal Considerations for Retirement Part 5: Power of Attorney

In the previous part of this blog series, we discussed the importance of a living will. When you have a living will, you will need to give someone power of attorney. In this part of the blog series, we will discuss power of attorney and what happens if you don’t have it.

What is Power of Attorney?
Giving someone power of attorney1 is a very important decision. Power of attorney gives another person the ability to make legal decisions on your behalf. If you become ill and incapacitated, then you may consider granting power of attorney to a spouse, adult child, sibling, parent or close friend. The person granted power of attorney has the legal right to make many important decisions including financial decisions, gifts of money, healthcare decisions and recommending a guardian for your children. Since someone granted power of attorney has the legal authority to make your financial and health decisions, you should choose someone that you trust. It is especially important to choose someone you can rely on because power of attorney is not regulated by the court system, which means it could be easy for someone to abuse this power. 

There are two types of power of attorney, general and limited. General power of attorney2 is granted when you want someone to have the legal authority to make your decisions in any instance for any amount of time. Limited power of attorney3 is granted to someone for a specific purpose. Someone may be granted limited power of attorney for either one specific event or one type of event. For instance, you could grant your spouse limited power of attorney to make health decisions. In this case, your spouse would be able to make health decisions on your behalf if you were incapacitated but would not have any control over financial decisions.

What happens if I don’t have power of attorney?
When you grant someone power of attorney, you ensure that someone you trust will be in charge of your legal decisions in the event that you are unable to take care of them. Once you’ve granted a person power of attorney, they can pay your bills, make bank deposits and handle insurance. They can even make property repairs and take care of your investments. If you do not have power of attorney and you become incapacitated, then your family will have to choose someone to take care of all of your legal decisions. If your family cannot decide, this choice will be left up to a court.

Granting someone power of attorney can provide you with a lot of reassurance. In part 6 of this blog series, we’ll discuss whether you need to hire an attorney to file for social security benefits or disability. We will also discuss what you can do if you get denied social security benefits.

1 "Power of Attorney" Wikipedia; http://en.wikipedia.org/wiki/Power_of_attorney

2 “What is General Power of Attorney?” Daily Legal Whirl; http://www.dailywhirl.com/what-is-general-power-of-attorney/

3 "Limited Power of Attorney - LPOA" Investopedia; http://www.investopedia.com/terms/l/limited_power_of_attorney.asp

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