Power of attorney documents are a vital part of any properly prepared estate plan. These documents explain how you wish to have your affairs handled in the event an injury or illness causes you to be unable to act on your own behalf. Without power of attorney documents, your loved ones would likely need to initiate a court proceeding to be granted authority over your affairs.
Financial Power of Attorney
A financial power of attorney, more commonly known as a durable financial power of attorney, gives a person the right to make financial transactions on your behalf in the event you become unable to handle your affairs on your own. This often includes routine tasks such as depositing your Social Security check and making sure your monthly bills are promptly paid. More complex tasks, such as monitoring your retirement or investment accounts, buying or selling assets, operating your business, or filing your tax returns, could also be included.
The person you give your power of attorney to is called your agent or attorney-in-fact. However, he or she doesn't need to be an attorney or a financial expert. In most cases, this person is simply a trusted family member or friend. If your finances are complex enough that professional assistance is needed, your agent can hire financial advisors and pay them from your assets.
An alternate agent is often named so someone will be available to step in if your first choice is unable. For example, you might choose to name your spouse as your agent and your adult son or daughter as the alternate who would step in if both you and your spouse became incapacitated at the same time.
The individual you select as your agent is legally obligated to keep accurate records of transactions, keep your finances separate from his or her personal accounts, and avoid actions constituting a conflict of interest.
Medical Power of Attorney
A medical power of attorney, more commonly called a durable power of attorney for health care, gives a person the right to make health care decisions on your behalf if you become too injured or ill to participate in your own care.
The person you choose to make decisions on your behalf is often referred to as your health care agent, health care proxy, or health care surrogate. Your health care agent should be trustworthy and understanding of your wishes and values. He or she should be willing and able to advocate for your needs if there are disagreements about the care you should receive.
Your health care agent can be a spouse, adult child, another family member, or close friend. As with the financial power of attorney, you can choose an alternate person to step in if your first health care agent is unavailable.
People often choose the same individual to have financial and medical power of attorney. However, if you feel it is appropriate, you can choose different people to handle each of these responsibilities. The only requirement is that you select people who will communicate and work well together to protect your interests.
Medical power of attorney is often supported by a document known as a living will. This health care directive explains your wishes regarding various types of medical interventions, including CPR, mechanical ventilation, tube feeding, and dialysis. It can also spell out your preferences for organ and tissue donation as well as whether you wish to donate your body for scientific research.
Your health care agent is legally bound to follow the preferences outlined in your living will. For other issues not discussed, he or she will be asked to use judgment and discretion.
The Importance of Keeping Documents Up to Date
Power of attorney documents, like other aspects of your estate plan, should be periodically reviewed to ensure they still reflect your current wishes. For example, if you were to divorce, you would probably not want to have your ex-spouse managing your financial or medical decisions.
Generally speaking, your estate plans should be reviewed whenever you have a significant change to your financial status, health status, or family relationships. In addition to these checkpoints, it's a good idea to get in the habit of reviewing documents every 10 years to make sure they still reflect your current wishes.
Colin Smith Law is committed to helping clients create estate plans that fit their unique needs. Call today to schedule a free, no-obligation consultation.