As part of any good estate plan you’ll likely create one or more powers of attorney. It’s important to familiarize yourself with these powerful legal documents before you create them so that you have a better understanding of what they do and why they are so useful.
Anytime you create a power of attorney you give your ability to make choices to someone else. This allows that person, or an organization, the legal authority to, for example, enter into contracts on your behalf or manage your financial affairs. The person or organization you select to do this is known as your agent or your attorney-in-fact.
All powers of attorney are documents that must state specifically the kind of powers you grant your agent. In estate planning, most powers of attorney are divided into one of two types: financial or medical. Financial powers let someone else handle your financial affairs for you, while medical powers, sometimes known as healthcare powers, give someone else the ability to make medical choices for you when you can’t.
As the person who creates a power of attorney, known as the principle, you retain the right to end your agent’s powers at any time. You can create powers that will automatically terminate such an authority, as well as those that allow your agent to act after you have become incapacitated, known as durable powers. Unless you create a durable power, all powers of attorney automatically terminate once you are rendered incapable of terminating them.