A power of attorney (POA) is part of a well-established estate plan and is a legal document allowing one person, known as the agent or attorney-in-fact, to act on behalf of another, the principal. This arrangement is crucial for managing financial, legal and health-related matters when the principal is unable to do so. In Tennessee, there are several types of POA. Each type serves different needs, making it essential to choose the right one based on individual circumstances. For help setting up your estate plan, consider working with a financial advisor.
How a Power of Attorney Works in Tennessee
A power of attorney (POA) is a crucial legal instrument that allows an individual, known as the principal, to appoint someone else, the agent or attorney-in-fact, to manage their affairs. In Tennessee, this document can help ensure that personal, healthcare and financial decisions are made according to the principal’s wishes, especially in cases of incapacitation.
A POA must be executed following certain formalities to be valid in Tennessee. The principal must be of sound mind when signing the document, and it must be witnessed by two competent adults or acknowledged before a notary public. These steps ensure that the principal’s consent is given freely and that the document is legally binding.
Once a POA is in effect, the agent can begin acting on the principal’s behalf. The agent’s authority typically includes managing bank accounts, signing checks, handling real estate transactions and making healthcare decisions, depending on the type of POA granted. The agent must act in the principal’s best interests, maintaining accurate records of all transactions and decisions made. In Tennessee, an agent’s fiduciary duty is taken seriously, and failure to adhere to these responsibilities can result in legal consequences.
Types of Powers of Attorney in Tennessee
The Volunteer State has several types of POA for personal, financial and healthcare decisions:
- General power of attorney: This type grants the agent broad authority to handle a wide range of legal and financial matters on behalf of the principal. It includes managing bank accounts, signing documents and handling real estate transactions. However, it becomes invalid if the principal becomes incapacitated.
- Durable power of attorney: Unlike a general POA, a durable POA remains effective even if the principal becomes incapacitated. This type is essential for long-term planning, as it ensures that the agent can continue to manage the principal’s affairs without interruption, covering all financial and legal responsibilities.
- Healthcare power of attorney: This POA allows the agent to make medical decisions for the principal if they are unable to do so themselves. It covers decisions about treatments, surgeries and other healthcare needs. It is important to ensure that medical care aligns with the principal’s wishes.
- Limited power of attorney: A limited POA grants the agent specific powers for a defined period or task. For example, the agent may be authorized to handle a real estate transaction or manage business operations while the principal is unavailable. Its scope and duration are explicitly outlined in the document.
- Springing power of attorney: A springing POA type only takes effect under certain conditions, typically when the principal becomes incapacitated. It provides a safeguard by ensuring that the agent’s authority is activated only when necessary, as determined by a medical professional’s certification.
Consulting a financial advisor or attorney can help you choose a POA that provides the necessary protections and aligns with your long-term goals.
How to Create a Power of Attorney in Tennessee
The first step in creating a POA is deciding which type of POA suits your needs. Tennessee offers several options, including general, durable, healthcare and limited POAs. A general POA grants broad authority, while a durable POA remains in effect if you become incapacitated. A healthcare POA focuses on medical decisions and a limited POA is restricted to specific tasks or timeframes.
Once you have determined the type of POA you need, the next step is drafting the document. It is advisable to seek legal assistance to ensure the document meets all legal requirements and accurately reflects your intentions. The POA must clearly state the powers granted to the agent and any limitations or conditions.
For a POA to be valid in Tennessee, it must be signed by the principal and witnessed by two competent adults or acknowledged before a notary public. The witnesses should not be the agents or potential beneficiaries of the principal’s estate. This step ensures the document is legally binding and the principal’s consent is given freely.
If your circumstances change, you can revoke or amend your POA at any time, provided you are still competent. To revoke a POA, you must provide written notice to your agent and any institutions that hold a copy of the document. For amendments, drafting a new POA and following the same execution steps is necessary.
Bottom Line
Whether you need a general POA for broad financial and legal decisions, a durable POA to ensure continuity in case of incapacitation, a healthcare POA for medical decisions or a limited POA for specific tasks, choosing the right type can make a significant difference. Each type serves a distinct purpose, and selecting the appropriate one requires careful consideration of your needs and circumstances.
Tips for Estate Planning
- Preparing a power of attorney can be for many purposes but each should be part of a larger estate planning process. Consider working with a financial advisor who can help you with all of your estate planning needs, in addition to helping you manage your finances. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- As you think about your own estate plan, consider these five mistakes that you don’t want to make.
Photo credit: ©iStock.com/sabthai, ©iStock.com/AmnajKhetsamtip, ©iStock.com/Worawee Meepian