Smart Quiz! What is the Greatest Risk of Giving Someone a General Power of Attorney?
A: Disregarding wishes
B: No oversight
C: Ultimate authority
D: All of the above
Answer: All of the Above
After a lifetime of managing your own affairs, giving someone Power of Attorney can be terrifying — and rightly so, since it comes with a great deal of risk. One way to limit the risk is to choose the Power of Attorney that only gives as much authority as is absolutely necessary.
General Power of Attorney: The agent can perform almost any act as the principal such as opening financial accounts and managing personal finances. A general power of attorney terminates when the principal becomes incapacitated, dies, or revokes the power of attorney.
Durable Power of Attorney: This designates a person to act on the principal’s behalf and includes a durable clause that maintains the power of attorney even after the principal becomes incapacitated.
Special or Limited Power of Attorney: The agent has powers always limited to a specific area. Some common examples of a limited power of attorney are:
- One that grants an agent the authority to sell a home or other specific piece of real estate
- One that grants a tax preparer to file taxes on your behalf
- One that names a particular person(s) to have the right to make healthcare decisions on your behalf
Springing Durable Power of Attorney: In some states, the law may provide for a “springing” power of attorney which is a viable option in special circumstances. It becomes effective only when a specified event occurs such as when the principal becomes incapacitated.
During the time that the agreement is in effect, the agent of your choosing has full power and control of your assets and obligations, limited only by the terms of the Power of Attorney. Choose wisely when you select a person to fill this role, and only do so under trusted legal guidance.
~Here’s to your Financial Health