Protecting your property is another important consideration to be made by others in the event that you become incapacitated. The way to take care of this is with a power of attorney (POA). With this document, you, as the “principal,” give authority to act on your behalf to your “attorney-in-fact.” This person does not need to be a lawyer to fulfill this duty.

In Chapter 10, you will learn about how trusts can protect your big investments either in the form of real estate or valuable securities and the like. Trusts do not, however, get down into the nits and grits of day-to-day decisions. This is where having a power of attorney can cover you when you cannot handle these daily responsibilities yourself.

Power of attorney can be a powerful tool, and if not managed properly, can boomerang on you with disastrous results. There are several versions of a power of attorney. The broadest is called a “durable power of attorney.” This POA takes place immediately. It gives your attorney-in-fact the power to act independently to make decisions affecting all of your financial affairs with or without your knowledge. Clearly, this is a step to be taken with a great deal of consideration for the scruples and trustworthiness of the person you select. In most cases, this step would be taken in anticipation of your not being able to handle your own affairs.

Limited Power of Attorney

A limited power of attorney is useful when you need someone to represent you in specific transactions. For example, if you are buying and selling houses on the same day in different states you may need to extend a limited power of attorney to your real estate agent or a local attorney in one locale to execute the transaction while you are in the other state. The limited power of attorney would detail the dates it is in effect and the specific transactions to which it applies.

Springing Powers of Attorney

Another way to trim the sails of a full-out durable power of attorney is to structure a “springing power of attorney.” This does not go into effect unless you become disabled. The drawback with this approach is that it may take time and some expense to establish your disability. If there is bickering among health care providers and family members as to whether you are, in fact, disabled, the whole mess can wind up in court.

Considerations for Inclusions in Power of Attorney

The primary goal for a power of attorney is to make sure ongoing obligations are met — bills paid, deposits made, administrative details continued. These would all be spelled out along with other predictable powers. Other powers that may not be immediately obvious but would need to be covered could include:

• Compensating your attorney-in-fact for handling your business

• Making gifts from your estate

• Handling tax matters and dealing with the IRS

• Handling retirement accounts

• Creating or amending trusts for your benefit

Because of the impact that using one type of a power of attorney over another might have on your ability to retain control over your finances and property, it would be best to seek professional legal counsel on how and when to implement these legal tools.