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What type of power of attorney is best for you?

On Behalf of | Aug 10, 2023 | Estate Planning And Probate

Deciding to set up an estate plan is a wise and responsible decision. Most people associate an estate plan with a will, but there are other types of documents that could be helpful as part of an overall estate plan.

One of these documents is a power of attorney. You may have a general idea of what a power of attorney does, which is give someone else the power to make certain decisions for you if you become incapacitated or are otherwise unable to make them for yourself.

However, there are several different types of powers of attorney that can be set up in Arkansas. Each type has a different purpose and gives different powers to the person you appoint as your power of attorney. The person you appoint is called an agent.

Durable power of attorney

As of January 1, 2012, every power of attorney executed in Arkansas is a durable power of attorney. This means that the document automatically becomes effective when you become incapacitated.

The only way you can establish a nondurable power of attorney is to have the document specifically state that it is terminated upon your incapacity.

Financial power of attorney

You can set up a power of attorney for your financial affairs, health care decisions or both. The financial power of attorney allows you to state who you want to handle your financial affairs if you cannot.

Your agent gains the power to pay your bills, manage your investments or take any other actions to help you remain financially stable while you are incapacitated.

Handling your financial affairs may be more complicated than simply paying your bills. For example, you may run or manage a business.

General and limited powers of attorney

In this case, a general power of attorney could work better for you. This power of attorney allows your agent to run your business while you cannot. Since you cannot predict what types of business decisions you need to make on a daily, weekly or monthly basis, the language of a general power of attorney is normally broader.

Alternatively, a limited power of attorney typically has more detailed language and allows your agent to only carry out certain business transactions for you.

Limited powers of attorney are usually more appropriate for situations where someone will only be temporarily incapacitated or otherwise unavailable and cannot make the decisions or handle the business affairs on their own.

Medical power of attorney

The health care or medical power of attorney acts in the same way, except instead of financial decisions, your agent makes health and medical decisions for you according to the instructions in the document.

Your agent’s powers are automatically revoked when or if you regain capacity and can start making the decisions for yourself again.

Otherwise, you can set an end date to your power of attorney. It will also automatically terminate upon your death or under certain other circumstances.

If you pass away, your agent has no power to decide what happens to any of your assets. The terms of your will then take over and determine the distribution of your estate. Therefore, having both a will and a power of attorney can help prevent confusion or conflict.