From more empathy to becoming less stigmatized, here’s how top influencers hope to see financial education change.
What is power of attorney?
Power of attorney is the designation given to someone who has the power to act on behalf of another person’s legal matters. It is in the form of written authorization signed by the grantor, who specifies what sort of actions the agent can take when the grantor is unable to make a legal decision himself. Powers of attorney can be both limited and broad in scope and cover such legal decisions as finance and health care.
Powers of attorney are granted in cases when someone expects to be away from her duties for a period of time, such as military deployment or major surgery. In common law, the person is able to make decisions on behalf of the grantor just like an attorney would. Grantors frequently designate a spouse or close friend or relative with power of attorney, because it’s necessary to trust that person to make decisions in the grantor’s best interest. The person given power of attorney is called the agent.
When someone faces a serious medical crisis, or starts showing signs of a mental disorder like dementia, it’s normal for that person to assign power of attorney to another person. That’s because she could quickly become unable to make decisions for herself, whether she loses the mental ability to understand certain legal concepts or becomes physically unable to participate in the decision-making process. The agent is able to establish a living will that establishes the grantor’s health care preferences, including what kind of life support she consents to and whether she wants to be resuscitated in the event of cardiac arrest. In the U.S., it needs to be specified that power of attorney extends beyond the grantor’s incapacity or death, which is called a durable power of attorney.
Power of attorney extends to financial matters as well. It can be limited, such as for a specific financial event like buying a home or bidding in an auction, or it can be general, in which the agent has more freedom to act in the day-to-day management of the grantor’s business or finances. In either case, the agent has a fiduciary duty to the grantor. Power of attorney can be overruled or revoked at any time.
Buying a home? If you gave power of attorney to your sister, have her check out Bankrate’s list of mortgage rates.
Power of attorney example
Todd is about to deploy with the Marines. He and his wife were in the market for housing when he got the call. He grants her limited power of attorney specifying that she can sign the mortgage on his behalf while he’s deployed. Once she finds a place she likes, she signs the mortgage on behalf of both of them, and her power of attorney ends.