Proper estate planning involves many different considerations. Along with wills and trusts, which stipulate how a person’s assets should be handled after they’re gone, implementing a power of attorney is also crucial. These legal documents appoint authority to another person in the event the creator is incapacitated by illness or injury at some point in their lives. Forbes explains a few of the many important details of powers of attorney, so you can make an informed decision about estate planning.
The primary component of a power of attorney is naming an agent to act on your behalf. Depending on the details of your arrangement, your agent will assume control and have access to certain assets if it’s determined that you’re no longer able to make sound decisions on your own. There are actually two types of powers of attorneys, each of which operates in distinct ways.
With a durable power of attorney, the document goes into effect as soon as it’s signed. Conversely, a springing power of attorney goes into effect when it’s determined that you’re no longer able to make decisions on your own. While a durable power of attorney can be intimidating to many people, since you’re giving a person a high level of power over your estate, it’s often easier to execute. For example, it can be difficult to gain access to bank accounts with a springing power of attorney since the bank will want very specific proof that the account holder is actually incapacitated.
Of course, you want to make the best possible selection when choosing an agent. The person should be trustworthy and have a good understanding of managing money. If you’re concerned about providing a single person with too much power over your assets, consider appointing two agents to act on your behalf at the same time. Dual agents act as checks on each other, which greatly reduces the chance that wrongdoing will occur.
