Most people are familiar with the concept of a power of attorney, or POA. You may have executed a POA before or been appointed as the agent in a POA at some point in your life. Because a POA is such a common legal document people often take the document lightly, sometimes with tragic consequences. Before you consider executing a power of attorney, be sure you understand the document you are signing and always choose your agent wisely.
A power of attorney is a legal arrangement in which a principal (the individual granting power or authority) grants power to an agent (the person who is granted the authority) to act on the principal’s behalf in legal transactions. A POA can be general or limited. A limited power of attorney only gives the agent specific authority to act under limited circumstances. For example, you might grant an agent the authority to sign your name to a lease agreement if you are renting out your home and you are not going to be available to sign the lease agreement. A general POA, on the other hand, gives the agent almost unfettered power to act on behalf of the principal. With a general POA your agent can do things such as withdraw funds from your bank account, buy, sell, or trade stock, or enter into a contract in your name.
If you make your POA durable the authority you grant to your agent will survive your incapacity. Therefore, a durable general power of attorney gives your agent the power to act on your behalf in almost all transactions while you are incapacitated. Think about that for a moment. Imagine that you are in a coma, unable to oversee what is happening to your assets. The agent under your durable general power of attorney could literally sell everything you own and you would be powerless to stop the agent. This should give you pause when considering who to appoint as an agent under a POA.
Clearly, you should trust the individual you appoint as your agent. If that individual is your spouse, as is often the case, be sure to revoke the POA if you separate or divorce at some point down the road. No matter how much you feel you can trust someone, never grant more authority to an agent than is necessary in a POA. Finally, consider appointing your attorney, or another professional, as your agent when practical. An attorney (or other professional) is bound by ethical standards required for licensing, offering a significant amount of security that the power granted will not be abused.
If you have additional questions about powers of attorney, consult with your Illinois estate planning attorney.
Latest posts by arlenec (see all)
- My Parent/Spouse Shows Early Signs of Dementia. Can We Still Do Medicaid Planning? - July 20, 2015
- What Happens to a Living Trust When One Spouse Dies? - July 13, 2015
- Medicaid Spousal Impoverishment Rules - July 7, 2015