There may be times when a person becomes incapacitated for one reason or another and is unable to make decisions for himself or herself. This can be the result of some type of mental illness, medical emergency, or some other factor. Whatever the case, it is a good idea to make sure your finances and healthcare needs are taken care of while you are in a state of incapacitation.
An effective method of ensuring you are taken care of is through the use of a legal instrument known as a power of attorney.
What is power of attorney?
A power of attorney is a legal document which provides legal power to an individual, the agent, to make decisions and act on your behalf in the case of you being incapacitated and unable to make decisions for yourself. You, the principal, can choose to make the authority granted by the power of attorney broad or limited to certain types of decisions. The authority granted can be in the arena of finances, personal property, investments, or healthcare.
General power of attorney
This type of power of attorney authorizes the agent to act on your behalf in all matters that are allowed by state law.
Limited power of attorney
With a limited power of attorney, the agent is given authority to act on your behalf in specific events or matters, such as managing retirement accounts. The authorization may be limited to a certain period of time as well. For example, if you know you will be out of the country for a period of three years, you can craft the legal document to specify authorization of the agent to act on your behalf during only this particular period of time.
Durable power of attorney
When you become incapacitated, having a durable power of attorney in place empowers the agent to make decisions regarding specified property, legal and financial matters which are detailed in the legal document.
Healthcare power of attorney
If you want your designated agent to only have authorization to make medical decisions for you, then you can use a healthcare power of attorney document to set this up. This legal instrument is also known as a healthcare proxy.
Financial power of attorney
This type of durable power of attorney authorizes your chosen agent to act on your behalf in regard to financial matters. Some of these matters of personal finance may include filing tax returns, signing checks, managing investment accounts, and dealing with Social Security payments. This can also include managing various business matters and dealing with property and asset management.
Estate planning purposes
Having a power of attorney in place can help to protect your assets in the case of something unexpected happening which leaves you incapacitated. Failure to have this essential legal instrument in place can result in mismanagement of significant assets which can endanger your ability to ensure your heirs are taken care of if you die.
There are also other aspects of a comprehensive estate plan which you should put in place as well. Talk to a professional financial advisor to get you started on preparing for the future.
Any opinions are those of the author and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. You should discuss any tax or legal matters with the appropriate professional.