The power of attorney, also known as a POA, can be an essential piece of your estate planning puzzle. Flexible, customizable tools that can be shaped to meet your specific needs, powers of attorney can allow you to designate agents to act on your behalf — both in the near term or in the future, in the event you are incapacitated and unable to make your own decisions about your finances, property, personal life, or medical care.
However, the different types of power of attorney, and their function and uses, can be confusing for many embarking on the estate planning process. Learn more about the different types of powers of attorney, including the durable power of attorney, and their potential uses as part of your estate planning process.
What Is A Power Of Attorney?
A power of attorney is, in the simplest terms, a legal document that empowers someone to take specific actions on your behalf. In a power of attorney, you — referred to as the “principal” — authorize another person — known as your “agent” or “attorney in fact” to make decisions about your property, finances, personal affairs, or medical care. The scope of your agent or attorney in fact’s authority is defined in the document creating the power of attorney itself, and can be as broad or as narrow as you’d like. In Illinois, a power of attorney is governed by the Illinois Power of Attorney Act, 755 ILCS 45/2-1, and can be applied to “property, financial, personal, and health care decisions.”
Powers of attorney can be shaped to fit any situation. For example, if you engage a financial planner, you may give that person a limited power of attorney to sell, buy, or otherwise manage your financial assets to carry out your financial planning goals. If you are engaging in a real estate transaction, you may grant your attorney-in-fact the power to sign purchase or sale documents on your behalf to avoid the need to sign documents in person.
Powers of attorney that function while you have the capacity to make your own decisions are known as “conventional” powers of attorney. These documents can be general, allowing your agent to make decisions on a wide range of issues, or limited, permitting your agent to act only in narrow circumstances or for narrow reasons.
When you designate an agent in your power of attorney, that person has an obligation to act in your best interests in carrying out the terms of that POA.
What Is A Durable Power Of Attorney?
A durable power of attorney is a power of attorney that continues in effect even if you become incapacitated. A durable power of attorney can be used to ensure that if you are unable to make your own decisions regarding health care, finances, or other matters, your wishes will still be carried out. In Illinois, your power of attorney is presumed to be durable unless you specify otherwise, or unless you divorce a spouse who has been previously designated as your agent — in the event of a divorce, your spouse’s power of attorney expires automatically.
A durable power of attorney can ensure that your loved ones do not have to go through a difficult guardianship process in the event you become unable to make your own decisions. A durable power of attorney can therefore be an important part of your Illinois estate plan, helping your loved ones to care for you in the event of a tragedy.
The two most common types of durable powers of attorney are:
- Durable power of attorney for health care. This type of power of attorney grants your agent the ability to make healthcare decisions on your behalf if you become incapacitated.
- Durable power of attorney for finances. This power of attorney permits your agent to make financial decisions and transactions on your behalf if you are unable to make these decisions.
You do not need to name the same agent for each different kind of power of attorney. For example, you may want to designate a friend or close family member to make your medical decisions, but a financial planner or attorney to manage your finances.
The Springing Power Of Attorney
As you’re creating your estate plan, you may also find that the “springing” power of attorney can be a useful tool. Unlike the conventional or durable powers of attorney, the springing power of attorney only goes into effect in specific circumstances, usually becoming effective upon your incapacitation.
The springing power of attorney can help you to retain control over all of your life decisions while you’re able. Then, when the circumstances dictate that your agent take over, he or she can seamlessly transition to help control day-to-day decisionmaking.
Ready To Get Started On Your Comprehensive Estate Plan? We’re Here For You
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Our dedicated team can help you understand what goes into the estate planning process, evaluate your assets, and prepare all necessary documents, including basic wills, trusts, and powers of attorney.
We know that every situation is unique, and our attorneys can provide you with a comprehensive one-on-one consultation to discuss your legal concerns and goals. Don’t hesitate to contact us to begin the conversation.