A power of attorney (“POA”) is a formal document by which you give another person, known as your agent, the authority to make decisions and/or take certain actions on your behalf if you become incapacitated. A power of attorney is an essential part of a well-crafted estate plan. It gives you the ability to protect your health and finances in the event of a disability due to injury, disease or old age.

There are two basic types of estate planning POAs:

• Medical POA — The purpose of a medical POA is to appoint someone you trust to make important and sometimes crucial decisions about your health care, such as whether potentially life-saving procedures should be performed. The power takes effect in the event you become incapable of making rational choices and/or communicating them to care providers.
• Financial POA — You can create a financial POA to designate a trusted person to take over and manage your finances, accounts and investments in the event you become cognitively impaired or otherwise disabled. The POA can be general in scope or limited to particular matters.

A POA may be “durable” or “springing.” With a durable POA, your agent can start making decisions on your behalf immediately. This form of POA is often created by people who are not incapacitated but know that they currently need help managing their financial affairs.

A springing POA vests authority in your agent to act if and when you become mentally incapacitated. This enables you to retain total control over your health care and finances for as long as you are able to attend to them. Issues sometimes arise as to whether a person has become mentally incompetent. This is often addressed in the POA itself by requiring an opinion as to competency by one or more physicians.

A mentally competent person can change or revoke a medical or financial POA at any time for any reason. For example, the person you selected as your agent might die or become otherwise unavailable. You might want to appoint an alternate agent to step in in such a situation. An estate planning professional can counsel you on structuring a POA in a way that best serves your interests.

Penrose Chun & Gorman LLP’s team of highly experienced California estate planning attorneys provides comprehensive and practical advice on preserving and managing assets and preparing for future contingencies. If you wish to create or revise an estate plan, contact us online or call 831-515-3344 to arrange a consultation at our Santa Cruz office.