You might remember your folks helping you open your first bank account and write your first check. And while that was a long time ago, you may not be ready for those roles to reverse, with you taking the financial lead for your parents. Unfortunately, it’s not uncommon that a parent would need an adult child’s help managing the finances, particularly if that parent starts to lose mental sharpness or the ability to make logical decisions.
Of course, that doesn’t mean you’ll simply start signing checks for your parents. You need the legal right to manage their finances, which you can get in one of two ways, depending on the situation. If your parents aren’t currently suffering from dementia or any condition that has lessened their ability to process information and make logical decisions, you and they can execute a power of attorney (POA). But if your folks are incapacitated, you have to take a different approach and petition the courts for legal guardianship or conservatorship.
If you’d like to know about how to get a power of attorney but aren’t sure where to start — we’ve created this guide with everything you need to know. Get a clear definition of what power of attorney is, how it works, the types of power of attorney, and how to go about the process.
What is Power of Attorney?
Power of attorney (POA) is a legal agreement that gives one person the right to make binding decisions on behalf of someone else. In that agreement, the person who’s receiving the right is called the agent or attorney-in-fact, and the person who’s giving their right to make decisions is known as the principal. Power of attorney can be broad or limited, enabling the agent to make decisions about the principle’s medical care, property, or financial affairs.
For example, if a POA grants you the authority to make financial decisions for your mom, you are the agent and your mom is the principal.
How a Power of Attorney Works
The first stage in starting the power of attorney process is recognizing when this option should be utilized. Power of attorney may be recommended for several circumstances, including:
- Elderly parents or loved ones who can no longer care for themselves
- Development of dementia
- Prior to military deployment, so someone can act on the principal’s behalf in case of incapacitation
- Prior to long overseas travel, so somone can handle affairs in the principle’s absence
Once a need for power of attorney has been established, it’s a good idea to seek legal counsel from someone who specializes in family law. Each state has unique laws around power of attorney, so you’ll benefit from someone who can guide you through the requirements and process.
The next step usually involves a discussion between the principle, agent, and legal counsel to determine what scope of power should be granted. This agreement should be drafted by your lawyer, and some states require signatures to be notarized. After the POA document has been finalized and signed, it becomes legally binding. However, the POA document can be revoked at any time by either destroying the original document and creating a new version, or by creating a formal revocation document.
Types of Power of Attorney
There are four types of power of attorney, which include:
General Power of Attorney
General power of attorney gives the agent broad power to make decisions relevant for several areas of the principal’s life. Examples of decisions an agent with general POA can make include the right to handle bank accounts, manage assets, and file taxes for the principle.
General POA is most commonly recommended if a principal will be out of the country for an extended period of time, or if they are physically or mentally incapable of handling their affairs for a prolonged period.
Limited Power of Attorney
A limited power of attorney gives the agent rights to make decisions within one or more specific areas of the principal’s life. For example, the agent may only be granted the power to make decisions regarding the principal’s medical care. Furthermore, limited power of attorney can even be specific to a single transaction, such as giving an agent the right to sell a home.
Limited power of attorney agreements may only be in effect for a specific period of time, such as if the principal will be out of the country for a pre-determined number of months or years.
Durable Power of Attorney
A durable power of attorney becomes effective as soon as the principal signs it and remains in force until the principal passes away or revokes the agent’s rights. Even if the principle becomes mentally incapacitated, a durable POA will remain active. For this reason, durable POAs may be utilized when it is expected the agent will need to make decisions for the principle for a long and unspecified period of time.
By comparison, any rights under a non-durable power of attorney are automatically revoked if the principal becomes incapacitated. Non-durable POAs are often used for single transactions and specific situations. For example, say your dad is closing escrow on a property while he’s travelling internationally. In that case, he could execute a non-durable POA so you could sign the closing documents on his behalf. If your rights are limited to that single transaction, the POA would be limited as well as non-durable.
Springing power of attorney
A springing power of attorney delays the agent’s rights until a specific condition is met. That condition could be a future date or, more commonly, it could hinge on the principal’s health. Say your mom wants you to have power of attorney if she cannot function independently, but she’s not comfortable giving you those rights today. You could execute a springing power of attorney to take effect when two medical doctors confirm that your mom can no longer make her own decisions.
Springing powers of attorney are legal in most U.S. states, but they do present some challenges in practice. Physicians may be reluctant to sign off on your parent’s inability to make decisions, and financial institutions may be wary of accepting a springing POA even when it’s signed by two doctors.
How to Get a POA for Elderly Parents in Good Health
Executing a simple power of attorney is not, in itself, difficult. But since POAs are binding legal documents, you should have a base level of knowledge about how they work before you move forward. The information above should give you a general understanding of the POA landscape, but for additional guidance we’ve detailed the steps on how to get POA for parents below.
1. Talk it through with your parent(s)
At this point, you should have a better idea of what type of power of attorney would suit your situation. If your parent is functioning today, but has been diagnosed with a degenerative condition, for example, you’d likely want a durable power of attorney. That way, you can take over the finances and healthcare decisions seamlessly, without having to get sign-off from her medical team. If you’re worried about your parents’ finances while they travel around the world for a year, a non-durable, financial power of attorney might be more appropriate.
Whatever your plan is, you’ll need your parents to agree with it to move forward. Be delicate in how you present the POA concept to them, as this is usually a sensitive topic for the elderly. A good place to start is by expressing your love and concern. Then, ask if they’ve already arranged for someone to help them with their finances and medical care if the time comes when they can’t care for themselves. You never know — they may have already executed a power of attorney with a close friend.
If your parents are open to executing a power of attorney with you, the next step is to talk through the details. Make sure there’s a shared understanding of what rights you’d have, when they’d be effective, how long they’ll last, and how you’d use them.
2. Consult with a lawyer
The laws governing powers of attorney vary from state to state. For that reason, it’s highly recommended that you consult with an elder law attorney to draft the POA document. That way, your POA will reflect the unique needs of you and your family. The attorney can also give you and your folks a detailed review of the rights granted by the POA and share scenarios in which those rights might be used.
3. Document your rights
The next step is to document the arrangement between you and your parents in the actual POA document. As noted, a qualified elder care attorney can draft this document for you. It should explicitly outline the scope of your rights as the agent, any exceptions to those rights, and any factors that would cause the POA to become invalid.
Alternatively, you can find simple power of attorney forms online. Know that while these might get the job done, they are generic — and generic language can be problematic in legal situations. It might not effectively address your situation. And, if the POA is ever contested down the road, a form you downloaded for free online may not hold up to legal scrutiny.
4. Execute the document
To execute the document, you and your parents will sign the POA, as agent and principal. State law dictates any other requirements; normally, you need to have two witnesses sign or have the document notarized. Your attorney can clarify the requirements in your state.
How to Get Power of Attorney for a Parent with Dementia
If your parent already has some level of cognitive impairment, you’ll have to take an entirely different approach. Legally, a parent who’s already incapacitated cannot sign a power of attorney. Even if you talked your parent into executing the document, a judge could invalidate the POA if your parent wasn’t of right mind.
The alternative is to petition the courts to appoint you as your parent’s conservator. This is a complex legal proceeding, and you will need an elder law attorney to help you. The success of your petition relies on your ability to prove that your parent can no longer make sound life decisions. There are long-lasting implications to that conclusion, and the courts take the evaluation seriously.
The process will be detailed and thorough. Once you file a petition with the court, the court assigns a committee of medical professionals and social workers to examine or interview your parent and report their findings back to the judge. Know that your parent will have his or her own legal representation, which is also assigned by the court. That lawyer will be responsible for explaining the conservatorship process to your parent, and also submitting an opinion as to whether the parent appeared to understand. A hearing will be held, during which anyone can testify for the conservatorship or against it. The judge then reviews all of the information at hand and rules on your petition. If the judge agrees with you, he or she will assign the rights you need to care for your folks. That normally would include access to their finances so you can pay for their care.
A Proactive Step to Avoid Hearings Later
Executing a durable power of attorney for parents now — before health problems set in — is a proactive step that’ll help you sidestep a conservatorship hearing down the road. But that’s only an option if your parents agree with your concerns, and they trust you won’t use your POA powers unnecessarily. If they’re uncertain about moving forward, offer to schedule a consultation for all of you with an elder law attorney. Sometimes, an objective opinion can help. Beyond that, all you can do is keep the lines of communication open and continue to build that trust.
While you’re going about this process and thinking about the future, make sure you also consider what to do with your parent’s life insurance policy. If you are considering letting it lapse or surrendering it, consider selling the policy instead — which can generate a value 4-11 times higher. For more information about this, contact Harbor Life Settlements.