What is a Power of Attorney?

December 21, 2022
Danielle Pierce

One important component of a comprehensive estate plan is establishing a Power of Attorney (commonly called POA) that would enable a person to manage your affairs or make decisions on your behalf should you become unable or incapacitated. There are many different types of POAs that offer different types of authority to your named agents. Understanding when each of these applies and the powers they grant will help you make informed decisions when it comes to creating an estate plan that meets your goals and needs.

What is a Power of Attorney?

A Power of Attorney permits the agent to deal with any matters on your behalf that state law allows. Under such an agreement, your agent may act as if they are you to handle your financial affairs or make medical decisions on your behalf. A well-drafted POA will allow you to designate which specific powers you’d like your agent to have, limiting or granting authority to a level you are comfortable with. Unless otherwise noted in the document, the powers granted in a POA go into effect immediately. This gives your agent immediate access and authority. So it’s important that you trust any person you name as POA to truly have your best interests at heart.

Permanent versus Temporary Power of Attorney

One thing to think about when naming an agent as your Power of Attorney is whether you want them to have permanent or temporary powers as your agent. Your POA can grant permanent authority, to be invoked immediately, or temporary authority that will be triggered (or activated) by a potential future event (such as mental or physical illness). The latter is known as “springing” Power of Attorney because the powers are “sprung” by a triggering event — such a hospitalization from an illness or injury. POAs may be rescinded, but the State of Ohio requires written notice of revocation to the named individual or entity.

Some Powers of Attorney are temporary and created for the sake of convenience, especially in the case of a single transaction, such as a property sale. Your agent may conduct the sale of a boat or a home described in the POA document. If you are traveling or know you will be unavailable to transact business, a temporary power of attorney enables you to give a trusted agent the authority to handle that business on your behalf. Parents with minor children, who are traveling without their children, will often use POAs to give their children’s caregiver authority to make medical decisions while they are gone. Once the time period or transaction is complete, the power of attorney terminates.

Durable versus Non-Durable Powers

A Power of Attorney may be durable or non-durable, depending on its purpose. A durable POA remains in effect even after the creator becomes incapacitated. This enables your agent to handle your finances and affairs or make medical decisions when you are unable to do so yourself. A non-durable POA, on the other hand, becomes invalid once the creator is incapacitated. People will create a non-durable POA to entrust a third party with the authority to handle affairs and can be permanent or temporary, designating authority to handle a specific transaction or timeframe.

Preventing Guardianships with POAs

Without a POA in place, the local probate court may need to appoint an individual to act on your behalf (granting them supervised authority to make medical or financial decisions), should you become incapacitated. This often happens when a person has not set up a POA but develops dementia or another medical disability that limits their capacity to appoint an agent. Guardianships are court proceedings in which the judge must grant permission to your guardian to expend funds on your behalf or make medical decisions that are in your best interest. The Guardianship process can be slow, tedious, and very expensive. Moreover, it is also a public proceeding, which means anybody can get access to your personal, medical or financial details.

Durable General Power of Attorney (Financial)

This POA permits an agent to manage your financial and business affairs. The agent’s responsibility is to carry out your wishes to the best of their ability. If the financial power of attorney is also a beneficiary of your estate, they must act with great care to avoid misinterpretation of intent. This document is not just for seniors. An unforeseen illness or unfortunate accident can render a healthy, younger individual incapacitated and in need of financial assistance. Many couples will create DGPOAs naming their partner as agent to enable them to handle their financial affairs anytime, regardless of incapacity. Single parents also often create POAs to enable a trusted person to manage their affairs and look after their children in case something should happen.

Healthcare Power of Attorney (HCPOA)

An HCPOA is also known as a healthcare proxy and permits a designated person or agent to make healthcare and medical decisions according to your specific instructions or their best understanding of your wishes. Again, consenting to an HCPOA agent for medical care decisions is not only relevant to seniors. An unforeseen illness or accident can render a healthy, younger individual incapacitated, which is why an HCPOA is a crucial estate planning document.

Power of Attorney for Minor Children

Parents of small (or minor) children often create a POA for Minor Children that grants a trusted agent authority to make decisions on behalf of their children. These may be temporary, as for when the parents go out of town and leave their children with a caregiver. They may also be spring once the parents are incapacitated or otherwise unable to care for their children. POAs for Minor Children are often drafted alongside a Nomination of Guardian for Minor Children, which enable parents to designate who they would like to serve as guardian for their children. While the probate court must appoint the guardian for minor children, these nominations are strongly considered during the proceedings.

Attorney Danielle Pierce At Pierce Legal, we can help you asses which powers of attorney are necessary for your specific situation. We get to know each of our clients, gaining a meaningful understanding and relationship with you that allows us to create a thorough estate planning strategy that will satisfy all of your planning goals and needs. Our practice provides professional legal advice and guidance focused in the areas of asset protection through proper estate planning, business services, and real estate assistance. Contact us today to schedule a consultation at (330) 588-6115.