Financial Power of Attorney for Elderly Parents
If you are the adult child of elderly parents, you may find yourself in a position in which you need to be more proactive in regard to protecting their interests. This may include making sure that your parents are living in a safe environment. It may also mean that you need to take steps to ensure that the financial interests of your aging parents are protected.
When it comes to the financial interests of your elderly parent, the time may have come when you can best protect them with a financial power of attorney. While you may have a general understanding of what is involved in a financial power of attorney, you may not have a full appreciation of what is involved with this type of important legal instrument. In this article, we provide you with a comprehensive overview of a financial power of attorney for elderly parents.
What Is a Durable Financial Power of Attorney?
When it comes to creating a financial power of attorney for your elderly parents, you want that instrument to be what legally is known as a durable financial power of attorney. Durable is the operative legal term of art.
A durable financial power of attorney is one that remains in full force and effect if your parent no longer has the mental capacity to make decisions on his or her behalf. A power of attorney for financial matters that is not durable ceases to be effective when a person no longer has legal capacity. In some instances, this is precisely the time when a financial power of attorney is most needed.
Definition of Power of Attorney
Having discussed what is meant by durable in regard to a financial power of attorney, we dig deeper into the definition of this type of instrument itself. According to Investopedia, a financial power of attorney is defined as:
A financial power of attorney or POA is a legal instrument that grants a trusted agent the authority to act on behalf of the principal in financial matters. The principal is the person who creates the power of attorney in the first instance, the individual in need of some level of financial assistance. The person granted the authority to act on behalf of the person that created the power of attorney is also referred to as the attorney-in-fact. The person who created the power of attorney in the first instance is known as the principal-agent in most instances. This kind of POA is also referred to as a general power of attorney in some instances.
Basic Facts About a Financial Power of Attorney
A financial power of attorney or financial POA is a legal instrument that allows a person the authority to act on behalf of someone else. The authority outlined in a financial POA can be fairly broad or, in some cases, restrictive, limiting the agent to very specific duties. Agents named in POAs are legally able to make decisions about the principal’s finances or property. Oftentimes, POAs are issued when the principal is ill, disabled, or is physically not present to sign important paperwork.
A financial power of attorney document is also referred to as a general power of attorney or a power of attorney of property. This POA gives the agent the power to manage the financial life of the principal. If a POA is durable, that authority to assist with financial matters remains in full force and effect when the individual who created the POA no longer lacks mental capacity. (As an aside, if an individual in assisted living ends up lacking mental capacity, it is possible that a person in that position will need to transition to a different type of long-term care facility. This might include a memory center.
The agent named in a financial power of attorney can legally manage the principal’s finances and property, make all financial decisions, and conduct all financial transactions that are within the scope of the agreement. The individual granted POA is limited to the agreement and cannot do anything not specified under the power of attorney. The agent is legally obligated to make decisions consistent with the wishes of the principal but has full authority to make autonomous decisions until that authority is challenged and/or revoked in a court of law.
Other Types of Powers of Attorney
There are some other derivations of powers of attorney beyond essential financial powers of attorney and durable financial powers of attorney that have been discussed previously in this article addressing your elderly parents and their fiscal wellbeing. These include:
- Limited power of attorney
- Healthcare power of attorney (or medical power of attorney)
- Springing power of attorney
Limited Power of Attorney
A limited POA gives the assigned agent a very limited power. Typically, there is a specific end date for the agreement. By way of example, someone may appoint a family member or friend as a limited POA if they are not available to sign important paperwork themselves at a specific time. In other cases, this POA may give the agent the ability to make cash withdrawals from the bank for the principal. A limited POA is also a type of nondurable power of attorney.
Healthcare Power of Attorney
A healthcare power of attorney is also known as a medical power of attorney. A healthcare power of attorney gives the designated agent the legal authority to make important medical decisions about the healthcare of the person that created the instrument. This particularly is the case when the individual that created the healthcare power of attorney becomes severely ill or incapacitated.
Springing Power of Attorney
A springing power of attorney only goes into effect once the principal becomes incapacitated and cannot make decisions on his or her own. In order to be effective, the document should outline the exact definition of incapacity so there is no confusion as to when the agent can begin acting on the principal’s behalf.