Understanding and Creating a Power of Attorney
A “power of attorney” is a written legal document that allows an adult individual to act on someone else’s behalf for a specified matter. Often a power of attorney is used in regards to property or financial matters, but it can also be used for non-tax issues such as Child Support collection, and Homeowner and Renter assistant.
An individual who is authorized to be a power of attorney can do many acts including:
• Delegating the authority or substitutive another representative
• Sign an income tax return on behalf of an individual
• Receive confidential tax information
• Sign waivers extending the statutory period for determining or assessing taxes
• Execute closing agreements or settlement agreements
• Receive cash or checks that are issued on behalf of the individual
While a power of attorney is a legal form, it is not a court form. The court is generally not involved with it although this can change if a person becomes unable to make their own rational decisions and a power of attorney must be assigned to the individual.
When creating a power of attorney document, the person who is creating is referred to as the principal while the individual who is being given authority is the attorney-in-fact. Despite the name the attorney-in fact does not have to be a lawyer, but must be at least 18 years or older and competent.
There are two major types of powers of attorney. The first is one that lasts until the principal chooses to end it. The second is only applicable and put into action when an event happens, such as a disease that leaves the principal incapacitated.
In order to create make a power of attorney, a form that is state specific must be filled out. The form will require both the names of the principal and the attorney-in-fact and will often have check boxes that indicate what matters the attorney-in-fact will have control over.
When considering who to choose as an attorney-in-fact, is in necessary to consider many issues:
• Is the person trustworthy?
• Does the person understand my perspective?
• Will the person act in my best interest?
• Is the person readily available?
• Does the person knowledgably about the issues at hand?
It is important to note that an attorney-in-fact must keep finances separated and is not allowed to transfer or give away any money to himself unless given the authority to do so. If this is desired, a private attorney must be hired to draft a specific document.
If for whatever reason, a power of attorney is not appropriate, there are other options. Conservatorship as well as guardianship can also be used, but they unlike a power of attorney, they are only granted by the state.