This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.
At its core, a power of attorney is the legal authority to act for another person. It allows someone to “step into the shoes” of another person.
There are generally two types of powers of attorney relevant to estate planning: medical and financial. A financial power of attorney is sometimes called “durable power of attorney for financial management,” or just “durable power of attorney.” The medical power of attorney is sometimes called the “advance healthcare directive”, “healthcare directive”, or “living will”.
A power of attorney gives someone the power to make decisions on your behalf when you either can’t do so yourself or don’t want to do so. This may arise when you are incapacitated or elderly; it may also arise if you are out of the country and need someone to call your bank for you, or sign a check for a contractor, or something similar.
The key is to ensure that you have given someone the power of attorney in advance of when you need them to act. Once you are deemed incapacitated, it’s too late to sign a power of attorney. Without the necessary powers of attorney in place, someone will need to go to court to obtain the legal authority to act on your behalf in a time of crisis. Going to court always involves time, expense, and the public nature of court can sometimes be humiliating for the person incapacitated.
So when should you have a power of attorney? Now.
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