There are several reasons why a person may need to have powers of attorney in place. For some people, delegating the ability and responsibility to work on their behalf in a single transaction may necessitate drafting a limited power of attorney for that transaction alone. For others, drafting a power of attorney granting another person broad powers to make financial decisions on their behalf is needed.
A designated agent with a power of attorney has the power to conduct business, make transactions and withdrawals, and sign contracts if those powers are given him or her. The agent is limited to acting according to the provisions of the power of attorney document. He or she must conduct the financial decision-making according to the grantor’s wishes as outlined.
With a durable power of attorney, the agent will only be able to make decisions in the event the grantor becomes incapacitated. Durable powers of attorney can be financial, medical or both. Unless the triggering event occurs, the power will not become effective. Limited powers of attorney are those that limit the agent’s power to specific events, transactions or other acts.
It is a good idea for most people to have durable powers of attorney in place in the event they become incapacitated, whether from an accident, illness or due to aging. It is also important to be careful in selecting the chosen agent as he or she will have a lot of responsibility in the event the triggering event occurs. In order to draft a power of attorney, the grantor should carefully outline his or her wishes and designate the person to whom the power to act will be granted. As it is important for the person’s wishes to be clearly delineated, most people find it beneficial to seek the assistance of their estate planning attorney.
Source: Colorado Bar Association, “Financial Powers of Attorney”, December 22, 2014