Caring for a loved one often means taking on their transportation to appointments, managing their medication, completing household chores, or helping them handle their daily activities. But it can often mean managing their finances as well.

Studies show that the ability to perform simple math problems, as well as to handle financial matters, can be among the first skills to become more difficult as people age. No one wants to think of a time when their parent or a loved one may need them to step in and make decisions for their care when they are unable. But it’s important to learn about crucial financial and legal considerations before you truly need to know what your loved one’s wishes may be.

Young or old, almost everyone needs a power of attorney at some point. A power of attorney (POA) is a document that allows you to appoint a person or organization to manage your property, financial, or medical affairs if you become unable to do so. This legal document allows a principal to appoint an agent to act for them should they become incapacitated. The agent is expected to place the principal’s interests ahead of his or her own, which is why it is important for you and your loved one to pick a trusted individual.

There are multiple types of decisions that the agent can be given the power to make, including the power to:

• Make financial decisions
• Make gifts of money
• Make healthcare decisions, including the ability to consent to giving, withholding, or stopping medical treatments, services, or diagnostic procedures. (Note: your loved one can also make a separate “health care power of attorney” to give only this power to another individual.)
• Recommend a guardian

All POAs are not created equal. Each type gives your attorney-in-fact—the person who will be making decisions on your behalf—a different level of control. We will be discussing for main types of POA’s in this blog.

General Power of Attorney

A general power of attorney gives broad powers to a person or organization (known as an agent or attorney-in-fact) to act on your behalf. These powers include handling financial and business transactions, buying life insurance, settling claims, operating business interests, making gifts, and employing professional help.

General power of attorney is an effective tool if you will be out of the country and need someone to handle certain matters, or when you are physically or mentally incapable of managing your affairs. A general power of attorney is often included in an estate plan to make sure someone can handle financial matters.

Special Power of Attorney

You can specify exactly what powers an agent may exercise by signing a special power of attorney. This is often used when one cannot handle certain affairs due to other commitments or health reasons.

Selling property (personal and real), managing real estate, collecting debts, and handling business transactions are some of the common matters specified in a special power of attorney document.

Health Care Power of Attorney

A health care power of attorney grants your agent authority to make medical decisions for you if you are unconscious, mentally incompetent, or otherwise unable to make decisions on your own.

While not the same thing as a living will, many states allow you to include your preference about being kept on life support. Some states will allow you to combine parts of the health care POA and living will into an advanced health care directive.

Durable Power of Attorney

Suppose you become mentally incompetent due to illness or accident while you have a power of attorney in effect. Will the document remain valid? To safeguard against any problems, you can sign a durable power of attorney. This is simply a general, special, or health care POA that has a durability provision to keep the current power of attorney in effect.

You might also sign a durable power of attorney to prepare for the possibility that you may become mentally incompetent due to illness or injury. Specify in the power of attorney that it cannot go into effect until a doctor certifies you as mentally incompetent. You may name a specific doctor who you wish to determine your competency or require that two licensed physicians agree on your mental state.