A power of attorney is a legal document that lets you name a person or entity to make financial and legal decisions on your behalf in the event you are unable to do so. Another benefit of a power of attorney is that it avoids having the courts appoint a guardian to oversee your assets if you become mentally incompetent or physically incapacitated.

You are referred to as the “principal” and you delegate a person who becomes your “agent” or “attorney-in-fact.” You should name an agent whom you trust to act in your best interests.

You may give your agent broad or limited powers. Examples of some of the powers that you may delegate include the power to:

• conduct bank transactions

• manage your property

• invest your money

• buy life insurance

• buy or sell real estate

• file tax returns

You can set a time period during which your agent can act for you. And even after you sign a power of attorney, you can still make decisions regarding your finances, insurance, property and health care. Depending on the type, your power of attorney only becomes effective under certain

Different Types of Powers of Attorney

Nondurable Power of Attorney
This document is often used for a specific transaction, such as closing on property if you are out of the country.

Durable Power of Attorney
This document includes specific provisions that make the document “durable” even after you become mentally incompetent. For example if you were stricken with Alzheimer’s and unable to make decisions, your power of attorney would become ineffective if it did not contain these clauses.

Health Care Power of Attorney
This document lets you designate an agent to make medical decisions if you are unconscious or mentally incompetent. This only becomes effective when you lose the capacity to make your own health care decisions. However, you should check the specific requirements in your state. For example, New York requires a health care proxy.

As with all legal matters, it is advisable to consult with your attorney before entering into any agreements.