If you are like a lot of people, granting someone else the power to handle your financial life is as scary as falling off a cliff.
The thing is, putting the right kind of financial power of attorney in place gives you a safety net and more control, even if you are incapacitated. This is because you can appoint someone you trust to make sure you are financially cared for, without court intervention.
The person you chose may manage your financial business, pay bills, sell property, contract for services, rent property, handle living arrangements, and conduct other financial activities. You are in control because you give as much or as little power as you choose.
There are four types of Financial Power of Attorney, and there are some important differences between them. Check them out below and learn how they can give you more control, and increased security.
1. Limited. You choose someone you trust who will have power to act in place of you for a very limited purpose. An example is granting him the right to sign a contract for you during a specific time frame, usually included in the document, when you are not available.
2. General. A comprehensive power of attorney. Your chosen attorney-in-fact will have all the powers and rights that you have yourself. She can use a general power of attorney to handle bills and other financial transactions for you. This POA can also be used if you were not incapacitated, but need help with financial matters. If you don’t rescind it, it will end when you die or become incapacitated.
3. Durable. A durable power of attorney can be general or limited. It remains in effect after you become incapacitated. If you become incapacitated, and do not have this POA, no one can represent you unless a court appoints a conservator or guardian. A durable power of attorney stays effective until your death unless you rescind it while you are not incapacitated.
4. Springing. Also called a conditional POA. As with a durable power of attorney, a springing power of attorney can allow your attorney-in-fact to act for you if you become incapacitated, but it does not become effective only if you are incapacitated. A springing power of attorney must have a clear standard for determining incapacity and triggering the power of attorney be clearly laid out in the document itself. For instance, military personnel, would not be incapacitated, but upon being deployed might use this to grant powers only until they return home.
Whichever POA you choose, you must completely trust the person you grant power of attorney to. They will have a lot of financial control. Alternately you can use a fiduciary company. Be sure to check licensing and references.