Your estate planning toolkit contains many different documents, each with its own unique purpose. We have all heard the term “power of attorney,” but what is the difference between a financial and medical power of attorney?
While both financial and medical powers of attorney allow someone to make decisions on behalf of another, each serves a different purpose, and each has distinct differences.
Financial Power of Attorney
A financial power of attorney is a legal document that allows a person to designate another individual to make financial decisions for them in the event that they are unable to do so themselves. Called an agent, this person may manage financial accounts, pay bills, file taxes, buy or sell property and make investment decisions on behalf of the principal. The agent’s authority can be limited or broad, depending on the wishes laid out in the document.
A financial power of attorney is only valid while the principal is alive. If they become incapacitated, be it physically or mentally, the agent is still authorized to act on their behalf. However, financial power of attorney terminates upon the principal’s death. The principal may also revoke the financial power of attorney at any time during their lifetime if they have capacity.
Medical Power of Attorney
A medical power of attorney is a legal document that designates someone to make medical decisions on behalf of another if the principal is unable to do so themselves. The appointed agent is given the authority to make decisions regarding medical treatments, procedures and end-of-life care. This does not give the agent free reign though; decisions must be consistent with the expressed wishes of the principal.
Like a financial power of attorney, a medical power of attorney is only valid during the principal’s lifetime. If the principal passes away, the agent loses the authority to act on their behalf. A medical power of attorney can also be revoked at any time during the principal’s lifetime if they have capacity.
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