Estate planning includes creating a will or trust, as well as other supporting documents. One of these important documents is a power of attorney. A power of attorney gives a person, called an agent, authority to make financial decisions on behalf of the person who drafted it, called the principal.
Power of attorney requirements
In order for the principal to create an effective power of attorney, it must contain several elements. The principal must be of sound mind and of legal age to create it. It must include specific information about the powers the principal is granting the to the agent.
The document must be witnessed by two adults and may need to be notarized. If the principal’s needs change, they can revoke the power of attorney, but they must be competent to do so.
Benefits
One of the primary benefits is that the principal can choose someone they trust to manage their financial affairs. The agent’s power can be broad or limited, depending on the principal’s wishes. This can help to prevent financial abuse. The agent cannot exceed the authority granted to them.
If the principal’s finances are complex, it may be especially helpful to designate an agent who has financial knowledge and experience.
A power of attorney also allows the principal to specify their needs, which is important if later they cannot manage their finances like paying bills or keeping track of investments.
It is also helpful for people who travel and need someone to attend to transactions in their absence. Estate planning can provide the principal with peace of mind and a power of attorney is an important part of the process.