Estate Planning Isn’t Just For The Elderly

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What are the types of powers of attorney?

On Behalf of | Oct 28, 2022 | Estate Planning

When you begin to plan for your estate and future, you will likely come across the term “powers of attorney” at one point or another. Powers of attorney are critical components of any well-thought-out estate plan because they enable trusted individuals to make decisions on your behalf should you be unable to do so for yourself.

Powers of attorney typically fall into one of two categories: financial and health care. In New York, a health care power of attorney is referred to as a “health care proxy.” CFI explains the differences between these two types of POAs.

Financial power of attorney

An individual with financial power of attorney will manage your financial and business affairs on your behalf should you become disabled, mentally incompetent, or unresponsive. If the Power of attorney is “Durable” they can handle your affairs both before incapacity and after incapacity. This person is responsible for everything from signing and cashing your checks to filing your tax returns and managing your investments.

He or she also has access to your bank accounts and can make withdrawals and deposits for your benefit. Given the level of access individuals with financial POAs have, the law requires them to act in the principals’ best interests and follow the instructions given in POA documents.

Health care power of attorney

A health care POA (or Health Care Proxy) allows an individual you elect to make health care decisions on your behalf. This person bears considerable responsibility, as he or she must decide the type and extent of care you will receive once you become unable to make decisions for yourself. He or she may also decide how long you will receive life-supporting care, or if you do at all, and when to end it.

An individual with a health care POA does have a document to guide his or her decisions. The law refers to this document as a health care proxy. It both gives your consent and details the POA’s privileges.

Powers of attorney have considerable power. For this reason, you should be careful in who you choose to represent you, and that you are meticulous when drafting each agreement.