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The Power of a Power of Attorney
A power of attorney allows the principal to delegate authority to the agent, sometimes referred to as the “attorney in-fact,” to act on the principal’s behalf in managing the principal’s financial affairs; however, the principal retains his or her power to perform these same functions. An important component of the power of attorney is “durability,” which enables the document to remain in effect, even if the principal becomes incapacitated. As a result, the document allows the agent to make financial decisions on the principal’s behalf, until the principal dies.
While powers of attorney carry a risk of financial exploitation, particularly to elderly individuals by people looking to take advantage of them, there are also significant benefits to having a properly-drafted, comprehensive power of attorney:
- Allows you to choose who will make financial decisions for you rather than the court being involved
- Avoids the necessity of a costly and complicated guardianship or conservatorship
- Makes clear the principal’s wishes and avoids disagreements among family members
- Prevents delays in asset protection planning, by specifying all powers necessary for the agent to effectively act on the principal’s behalf
- Allows agent to communicate with financial institutions and engage professionals to provide services for the principal
- Provides immediate access to principal’s assets, without awaiting court approval
For the reasons listed above, a comprehensive power of attorney drafted by an attorney is an extremely important estate planning tool, yet the document is often underemphasized.