To best prepare yourself for the future, you should understand the differences between a financial and medical power of attorney (POA). As part of comprehensive estate planning, naming a power of attorney can help ensure your affairs are in order. However, deciding which power of attorney is right for your situation can be difficult.
A power of attorney is a legal document between two parties: the principal and the attorney-in-fact. Once enforceable, a POA grants the attorney-in-fact, also commonly known as the agent, rights to act on the principal's behalf. The scope of powers conveyed to the agent under a POA can range from the ability to pay bills to having the agent choose where the principal resides.
Most power of attorney agreements become effective as soon as they are signed. This means that the agent can begin acting on the principal's behalf immediately. If you only want the POA to be in force if you become incapacitated, you should consider a springing power of attorney. Likewise, if you want your POA to be enforceable even if you are medically unable to make vital decisions, you will sign a medical power of attorney.
Understanding the Financial and Medical POA
Generally, people sign a power of attorney for two primary reasons. First, someone may seek a POA to ensure their finances and business interests are looked after if they are unavailable or unable to make timely decisions. Therefore, they enact a financial power of attorney.
Second, a person wants to specify a loved one who can make healthcare decisions if they become incapacitated. This individual requires a medical power of attorney.
You can also choose an agent who has the power to make both medical and financial decisions on your behalf. Principals have broad authority to outline what decisions the attorney-in-fact can undertake.
How Does the Financial Power of Attorney Work?
A financial power of attorney gives the agent the right to make monetary and business decisions on the principal’s behalf. Some of the decisions an agent can make under a financial POA include:
- Paying bills
- Buying or selling stocks
- Investing in a new company/opportunity
- Selling personal assets like cars or homes
- File taxes
State law defines the default powers an agent can have under a financial POA. However, you can limit or expand these powers specifically in your own agreement.
There are some things that your agent will not be able to do as a financial POA. For example, the attorney-in-fact cannot change your will or transfer their duties as an agent to another person.
When to Choose and How to Write a Financial POA
Having a power of attorney in place before you suffer an illness or injury that leaves you disabled can be crucial. Without a valid power of attorney, a court may appoint a conservator to manage your finances if you are incapacitated.
To avoid potentially having a court-appointed conservatorship in charge of your business interests, you should write your POA sooner rather than later. During estate planning is an excellent time to review your contingency planning. You can appoint someone you trust as an agent now, knowing they will not use their powers until needed.
You may also consider enacting a living trust to manage and protect your wealth if you have significant assets. Your agent will not have power over the trust unless you also make them a trustee.
Start a Durable (Financial) Power of Attorney
How Does the Medical Power of Attorney Works?
The medical power of attorney is similar to a financial POA; only the duties given to the agent are related to health care. Under a medical POA, the attorney-in-fact has the right to make decisions affecting your care and treatment, such as:
- What doctor or hospital you visit
- Whether to have surgery
- Whether you will receive healthcare at home or in an assisted-living or other facility
In fact, a medical POA grants strong powers to the agent. In consultation with doctors, your attorney-in-fact can even choose whether you take medication and what/when you eat. Depending on the severity of any disability, a medical POA agent can control most aspects of your life.
A medical POA cannot grant the agent the power to make end-of-life decisions, like whether to withhold care if you are in a vegetative state. If you have wishes to either continue or stop life-support treatments if you are fully incapacitated, you should write a living will.
When to Choose and How to Write a Medical POA
Ensuring you have a medical POA in place prior to any serious illness or injury is paramount. If you do not have an enforceable POA and you become incapacitated, a court can appoint a guardian to make decisions on your behalf.
If the court is involved, you will have no say in who is making life-altering choices for you. However, choosing a springing POA can be complicated because its validity is based on your incapacity. Debates about whether you are or are not disabled can be fraught, emotional, and costly.
Start a Medical Power of Attorney
Medical and Financial POA Differences
The following is a table showing some of the crucial differences and similarities between the two types of POA.
| Financial Power of Attorneyh | Medical Power of Attorney |
|---|---|
| Can pay bills on your behalf. | Does not necessarily have access to your bank accounts. |
| Cannot impact your healthcare decisions. | Makes decisions about where and when to receive healthcare. |
| Cannot change your will. | Cannot change your will. |
| Cannot appoint a new agent. | Cannot appoint a new agent. |
Remember to focus on ensuring your agent is trustworthy and competent. A good agent combined with a well-thought-out power of attorney can significantly reduce the stress of significant life planning.
If you are ready to draw up a power of attorney agreement that meets your needs, LawDistrict.com has resources at your fingertips. Use our easy-to-use contract maker tool to draft a power of attorney that meets your individual specifications. Just follow the step-by-step instructions, and you will have a well-tailored document within minutes!
Read more: How to Get a Power of Attorney for Someone Who Is Incapacitated
To best prepare yourself for the future, you should understand the differences between a financial and medical power of attorney (POA). As part of comprehensive estate planning, naming a power of attorney can help ensure your affairs are in order. However, deciding which power of attorney is right for your situation can be difficult.
A power of attorney is a legal document between two parties: the principal and the attorney-in-fact. Once enforceable, a POA grants the attorney-in-fact, also commonly known as the agent, rights to act on the principal's behalf. The scope of powers conveyed to the agent under a POA can range from the ability to pay bills to having the agent choose where the principal resides.
Most power of attorney agreements become effective as soon as they are signed. This means that the agent can begin acting on the principal's behalf immediately. If you only want the POA to be in force if you become incapacitated, you should consider a springing power of attorney. Likewise, if you want your POA to be enforceable even if you are medically unable to make vital decisions, you will sign a medical power of attorney.
Understanding the Financial and Medical POA
Generally, people sign a power of attorney for two primary reasons. First, someone may seek a POA to ensure their finances and business interests are looked after if they are unavailable or unable to make timely decisions. Therefore, they enact a financial power of attorney.
Second, a person wants to specify a loved one who can make healthcare decisions if they become incapacitated. This individual requires a medical power of attorney.
You can also choose an agent who has the power to make both medical and financial decisions on your behalf. Principals have broad authority to outline what decisions the attorney-in-fact can undertake.
How Does the Financial Power of Attorney Work?
A financial power of attorney gives the agent the right to make monetary and business decisions on the principal’s behalf. Some of the decisions an agent can make under a financial POA include:
- Paying bills
- Buying or selling stocks
- Investing in a new company/opportunity
- Selling personal assets like cars or homes
- File taxes
State law defines the default powers an agent can have under a financial POA. However, you can limit or expand these powers specifically in your own agreement.
There are some things that your agent will not be able to do as a financial POA. For example, the attorney-in-fact cannot change your will or transfer their duties as an agent to another person.
When to Choose and How to Write a Financial POA
Having a power of attorney in place before you suffer an illness or injury that leaves you disabled can be crucial. Without a valid power of attorney, a court may appoint a conservator to manage your finances if you are incapacitated.
To avoid potentially having a court-appointed conservatorship in charge of your business interests, you should write your POA sooner rather than later. During estate planning is an excellent time to review your contingency planning. You can appoint someone you trust as an agent now, knowing they will not use their powers until needed.
You may also consider enacting a living trust to manage and protect your wealth if you have significant assets. Your agent will not have power over the trust unless you also make them a trustee.
Start a Durable (Financial) Power of Attorney
How Does the Medical Power of Attorney Works?
The medical power of attorney is similar to a financial POA; only the duties given to the agent are related to health care. Under a medical POA, the attorney-in-fact has the right to make decisions affecting your care and treatment, such as:
- What doctor or hospital you visit
- Whether to have surgery
- Whether you will receive healthcare at home or in an assisted-living or other facility
In fact, a medical POA grants strong powers to the agent. In consultation with doctors, your attorney-in-fact can even choose whether you take medication and what/when you eat. Depending on the severity of any disability, a medical POA agent can control most aspects of your life.
A medical POA cannot grant the agent the power to make end-of-life decisions, like whether to withhold care if you are in a vegetative state. If you have wishes to either continue or stop life-support treatments if you are fully incapacitated, you should write a living will.
When to Choose and How to Write a Medical POA
Ensuring you have a medical POA in place prior to any serious illness or injury is paramount. If you do not have an enforceable POA and you become incapacitated, a court can appoint a guardian to make decisions on your behalf.
If the court is involved, you will have no say in who is making life-altering choices for you. However, choosing a springing POA can be complicated because its validity is based on your incapacity. Debates about whether you are or are not disabled can be fraught, emotional, and costly.
Start a Medical Power of Attorney
Medical and Financial POA Differences
The following is a table showing some of the crucial differences and similarities between the two types of POA.
| Financial Power of Attorneyh | Medical Power of Attorney |
|---|---|
| Can pay bills on your behalf. | Does not necessarily have access to your bank accounts. |
| Cannot impact your healthcare decisions. | Makes decisions about where and when to receive healthcare. |
| Cannot change your will. | Cannot change your will. |
| Cannot appoint a new agent. | Cannot appoint a new agent. |
Remember to focus on ensuring your agent is trustworthy and competent. A good agent combined with a well-thought-out power of attorney can significantly reduce the stress of significant life planning.
If you are ready to draw up a power of attorney agreement that meets your needs, LawDistrict.com has resources at your fingertips. Use our easy-to-use contract maker tool to draft a power of attorney that meets your individual specifications. Just follow the step-by-step instructions, and you will have a well-tailored document within minutes!
Read more: How to Get a Power of Attorney for Someone Who Is Incapacitated
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