There are three main types of power of attorney. What exactly is a POA? A power of attorney document is an important estate planning tool. It gives an individual or perhaps more than one individual the authority to make decisions on your behalf regarding property, financial affairs or personal care. For example, an attorney can:
- deposit and withdraw funds from your bank account
- deal with creditors and make payments on debts
- purchase suitable investments on your behalf
- deal with rental, business or commission income
- purchase real estate on your behalf
- provide and decide on medical care decisions
At the time of signing, you must be mentally capable and aware of consequences that might arise . The person who gives the power of attorney is known as the donor or principal and the person who receives the power is called the donee or attorney.
When it comes to dealing with your finances and property, there are two types of power of attorney: general and continuing. Through a general power of attorney, the donor is mentally capable and is able to make decisions on their own in addition to POA. If the donor passes away or becomes mentally incapable, then the general power of attorney is cancelled. If you’re worried about the donor’s mental health in the future, it’s recommended that you sign an enduring/continuing power of attorney in order to make decisions on behalf of the donor in the future.
Common Types of Power of Attorney
- General Power of Attorney
- A general power of attorney is a legal document which gives another individual authority to make financial and property decisions on your behalf while you’re mentally capable.
- Continuing or Enduring Power of Attorney
- If you become mentally incapable, an individual who has enduring or continuing power of attorney may make decisions on your behalf related to financial and property matters. This type of power of attorney offers the most flexibility.
- Power of Attorney for Personal Care
- If you become incapacitated, the donee has the authority to make decisions about your personal care such as health, housing, meals, clothing, etc.
Before you decide on which type of power of attorney is right for you, it’s important to consider your own personal life circumstances.
