Most estate planning attorneys believe in comprehensive planning and, as such, recommend that clients, at minimum, create both a last will and testament and a durable power of attorney. The two estate planning tools can be used in conjunction to protect you and your assets during your lifetime and after your death. The durable power of attorney protects you during your lifetime and the last will and testament governs what happens to your assets after your death.
What is a Power of Attorney?
A power of attorney is a legal document that authorizes one person, referred to as the agent, to act on behalf of another, known as the principal. Typically, a power of attorney is executed for the purpose of handling legal, financial or medical matters for someone when they are unable to do so themselves.
With a power of attorney, you can pay bills, manage bank accounts, financial portfolios, and real estate investments. The power of attorney identifies the particular tasks or duties the agent will be authorized to perform. A power of attorney does not require you to give up the right to manage your own affairs but simply allows someone else to act on your behalf if that becomes necessary.
Not all Powers of Attorney Operate the Same Way
Every client’s needs are different. Luckily, there are different types of powers of attorney that operate in different ways. One basic difference may be the scope of the authority granted to the agent. A power of attorney can provide broad authority, or it can be special or limited. The authority you convey can either start immediately or only after a specified event occurs.
Examples of the Different Types of Powers of Attorney
A general financial power of attorney allows the agent to transact any or all business, other than health care, for the principal. A durable financial power of attorney remains in effect even if the principal becomes incapacitated. A durable power of attorney for health care gives the person you designate the power to make health care decisions for you. These decisions can include consent, refusal of consent, or withdrawal of consent to any care, treatment, service, or procedure to maintain, diagnose, or treat a physical or mental condition. Federal laws make special provisions for the drafting of powers of attorney for Military personnel, in order to allow a spouse or other agent to handle their affairs while they are deployed.
How are General and Limited Powers of Attorney Different?
A general power of attorney basically provides very wide-ranging authority. So, for example, if the power of attorney is for financial affairs, then the agent will have the authority to conduct any necessary transactions as long as they are for the benefit of the principal. A limited power of attorney, on the other hand, provides very specific instructions with certain limitations on the agent’s scope of authority.
Another way to look at the difference is that a general power of attorney is used to give full authority to handle all important decisions, so the principal’s affairs will not be left unattended. While a limited power of attorney provides instructions for very specific duties or transactions. Once those duties have been accomplished, the powers are then revoked.
What is a Last Will and Testament?
The Last Will and Testament is a very useful legal document that describes to everyone who survives you precisely how you want your property distributed after your death. Wills are very useful because they can be easily customized, and they can be modified or even revoked at any time while you are still living.
Who Can Create a Last Will and Testament?
When creating a will, you must possess the legal competency or mental capacity to do so. Otherwise, the will may not be considered valid by the court. However, simply because someone has a mental illness or disease, that does not mean they automatically lack the required mental capacity. In fact, if the testator has periods of clarity, he or she could still be considered competent at the time the will is executed, if it occurs during that period of lucidity.
Can a Last Will and Testament Help Avoid Probate?
The property covered by a will must go through probate. Essentially, the probate court must supervise the administration of a will after determining that the will is valid. The court, through the efforts of the executor of the will, ensures that the estate property is distributed based on the wishes of the deceased. On the other hand, trust property is transferred outside of the probate process, which means the court is not required to manage the process.
Join us for a free workshop today! If you have questions regarding durable powers of attorney, wills, or any other estate planning matters, please contact the experienced attorneys at Gaughan & Connealy for a consultation. You can contact us either online or by calling us at (913) 262-2000. We are here to help!