Power of Attorney: What is it and How to Set it Up
A power of attorney (POA) is one of the most valuable legal documents in estate planning, as it serves a crucial purpose while you are still alive. However, when you think of estate planning, the majority of people and content on the internet focus on wills and trusts. Don’t get us wrong, those are incredibly important as well! But, creating a POA is something you can greatly benefit from, even as early as 18 years old with little to no assets.
We’ve talked about the importance of POA and the many kinds of POAs available for your needs. In this post, we’ll explain in detail how to do a power of attorney in Arizona. We’ll also provide valuable resources including a free printable power of attorney for your estate planning needs.
Power of Attorney Definition
First, a brief explanation of a power of attorney. A power of attorney is a legal document that allows you to designate another person to make important decisions on your behalf. In a POA, the person making the arrangements is called the principal. The person you are designating to act on your behalf is the agent.
A POA is only valid if the principal is mentally competent during the document's creation. Furthermore, the agent can only exercise their power of attorney once the principal is incapacitated or no longer able to handle their own affairs.
A power of attorney ends in several ways depending on the type and conditions of the document. The most common ways that a POA can end include:
Upon reaching a specified date or duration
Completion of the purpose
Fulfillment of conditions
Revocation by the principal
Death of the principal or agent
Bankruptcy of the principal or agent
Involvement of the principal or agent in legal proceedings
Types of Powers of Attorney
Most people grant POAs for specific purposes, while others assign one for general power over their assets. POAs can come in different types following special conditions and terms, but the general types are:
General Power of Attorney
A general POA lets you grant broad authority to your agent, allowing them to manage your bank accounts, make business decisions, dispose of or acquire properties, and enter into similar transactions on your behalf.
Limited or Special Power of Attorney
A limited or special POA allows you to set specific authority to your agent over a specific time or duration. For example, you can grant your agent to manage your investment portfolio until your child reaches the legal age.
Durable Power of Attorney
A durable POA allows you to grant your agent specific or general authority that remains valid even if you become incapacitated.
Medical or Healthcare Power of Attorney
A healthcare or medical POA is a special kind of POA that lets you authorize your agent to make healthcare decisions on your behalf.
Financial Power of Attorney
A financial POA is another special power of attorney that lets you assign an agent to take over financial matters on your behalf. This includes many kinds of financial decisions and assistance that are incredibly valuable if you are incapacitated. For example, your agent could access your accounts and continue paying your mortgage while you’re in the hospital.
A power of attorney is most useful when you designate a specific power for your agent. A POA that grants a broad authority runs the risk of confusion over your intentions or worse, the risk of your agent abusing or misusing their power over your assets.
Steps in Setting Up a Power of Attorney
The steps in setting up a POA can vary depending on the specific types, purposes, and circumstances. The following is a general outline of the steps you must go through to obtain an effective POA:
1. Do your research.
Do not enter into any legal document you do not understand. Read about POAs and perform thorough research on the topic. Read multiple sources and consult with experts to ensure the accuracy of your information. It also helps to have a clear grasp of your needs and personal objectives before deciding on setting up a POA. This is something that the experts here at Rilus Law can guide you through in the free Personal Family Legal Session.
2. Choose your type.
Choose from the many types of POA for the one (or several) that fits your circumstances and objectives. Understand that there is no one-size-fits-all type of POA. Also, even when you find an ideal type, you might still need to modify it to adjust to your specific requirements.
3. Select an agent.
The ideal agent is trustworthy, competent, reliable, and willing to perform their POA responsibilities. Exercise great care when choosing your agent to ensure that your intentions are carried out to the utmost extent. While your power of attorney can act as a guide for many things, your agent may still end up in a position of interpreting your wishes while making decisions for you.
You can choose your agent from the closest of your family or friend circles. Depending on your needs, you can also consider a professional like an attorney, financial manager, or accountant. These professionals come with fees, but they provide impartial and competent services.
4. Draft the document.
To take effect, a POA must be drafted in compliance with the legal requirements of your jurisdiction or state. In Arizona, you can use the forms linked here to set up your healthcare POA and general POA. These two free POAs are provided by the Arizona Attorney General and the Superior Court of Arizona in Maricopa County, respectively. If a free power of attorney meets your needs, then these are great resources. However, if you would like personalized guidance and a power of attorney customized to you and your situation, the experienced Rilus Law team is here to help you.
5. Review and revise.
Carefully review the power of attorney document to ensure that it accurately details all your wishes and all necessary powers you wish to grant to your agent. Revise accordingly if changes are necessary.
6. Execute the document.
To be valid, you and your chosen agent must sign the power of attorney in the presence of a notary public or witnesses. Notarization is not required in some states, but it is much safer to have a notarized POA. A notarized power of attorney is often stronger than one that isn’t notarized if the document’s validity or your mental capacity at creation is questioned.
A typical POA document includes:
Principal and agent identification and information.
Detailed and specific powers granted to the agent.
POA duration, whether it is temporary or durable.
Principal, agent, and witness (if required) signatures.
Notarization (if required).
7. Distribute the copies.
Give copies of your executed POA to relevant parties for their information and recognition of your agent’s authority. Depending on your POA type, these parties may include your banks, finance manager, property manager, healthcare provider, etc.
8. Register the document.
It is not required to register your power of attorney in Arizona courts and other government agencies, but doing so can provide extra protection in case of challenges to the document’s validity that may come up in the future.
9. Inform relevant parties.
Upon execution and registration of your power of attorney, inform the people involved in it. These individuals may include your family members, friends, and healthcare providers. This is for them to be aware of the existence of the POA and know who to contact when the need arises.
10. Review periodically.
As with all of your estate planning documents, conduct a regular document review at least once a year to ensure that the information and conditions are up to date. Immediately update your power of attorney if changes in your circumstances or relationship with your agent occur.
Questions About an Arizona Power of Attorney? Ask Rilus Law.
When done right, a power of attorney is a simple but valuable tool in estate planning. Creating a valid POA helps ensure your wishes and intentions are followed even when you are no longer capable of handling your affairs. When in doubt about how to set up the ideal POA for your needs, ask our seasoned experts at Rilus Law. Call to schedule your free consultation today!