Power of attorney

While taking precautions and making certain decisions before the unexpected happens is a smart approach, there are certain decisions you can't make now, and you might not be able to make if you become seriously ill.

To protect yourself in those situations, you may want to consider creating a legal document known as a power of attorney. In it, you give someone, known as your agent, the power to make financial and legal decisions when you're not able to.

There are different powers of attorney you can consider:

Ordinary: Power is granted as soon as the document is signed, and lasts either for the duration of a specific event — such as the selling of a home — or until you become incapacitated.

Durable: Power goes into effect as soon as the document is signed and lasts until you revoke it. Unlike an ordinary power of attorney, a durable one is still in effect even if you become ill, disabled or incapacitated.

Springing: Power takes effect at a certain point or after a particular event. When creating a springing power of attorney, you choose the event, usually the onset of an illness or incapacity, which puts the document into effect.

While you can create any kind of power of attorney on your own, it's a good idea to consult with a lawyer about the specifics of what you're considering. A professional can help make sure you don't inadvertently give someone power you don't want them to have, or, alternatively, that your agent has the authority to act that you intend.

Choose carefully

You'll want to carefully consider whom you choose to designate as your agent. It should be someone you trust as well as someone who's familiar with the decisions that may need to be made and the particulars of your financial situation. Make sure to ask whether the person is comfortable in the role of your agent, too.