Three Different Kinds of Power of Attorney

Without a durable power of attorney, helping a family member or loved one who cannot act on their own becomes far more difficult and stressful. Powers of attorney, also known as POA, typically give the agent specific powers to conduct the person’s financial business, explains the Aiken Standard in the article “The durable power of attorney.”

There’s also a healthcare power of attorney, which gives the named person the authority to make medical decisions, usually when the person is not able to do so because of illness or injury.

There are three different powers of attorney: non-durable, springing and durable. A non-durable power of attorney becomes effective immediately upon execution by the person. It remains active until it is either terminated or revoked by the person themselves, the person becomes mentally incapacitated or if the person dies.

The durable power of attorney is in effect from the moment it is executed. It is not revoked if the person becomes incapacitated (hence the term “durable”), nor by the passage of time. The person can alter or terminate a durable power of attorney at any time before there is physical or mental incapacity, however, and it does end when the person dies.

Springing powers of attorney become effective at a future date. They “spring” into power, according to the terms of the document. That may be the occurrence of a particular event, like the person becoming incapacitated or disabled. They can be problematic, as there will be a need to prove that the person has become incapacitated and/or disabled.

The advantage of the durable power of attorney is that it remains in effect even after the person has become impaired. The agent has the ability to act right away. If time is of the essence (i.e., there is an emergency that requires quick action), there is no need to go to court to have the approval to act.

For many people, having a durable power of attorney for financial matters and another, separate document, for medical decisions, is the best way to go. Some states require that these two powers be embodied in two different documents. A local estate planning attorney will know what your state requirements are.

Power of attorney documents should be created and executed, along with a complete estate plan, long before an individual begins having problems in aspects of their lives. When they are signed, it is necessary for the person to have full mental capacity. They have to be able to be “of sound mind.” If they have been diagnosed with dementia or Alzheimer’s, it is necessary that all these documents be prepared as soon as possible. If they lack mental capacity, the will and all related documents are likely to be challenged.

Without a durable power of attorney, family and friends won’t be able to make important financial decisions, pay bills, make healthcare decisions and engage in any kind of Medicaid planning. Anyone who wanted to take on any of these responsibilities would have to go to court and be appointed the person’s guardian. It’s much easier to tackle these tasks in advance, so that the family can act on their loved one’s behalf in a timely and effective manner.

Reference: Aiken Standard (August 24, 2019) “The durable power of attorney”

Power of Attorney: Why You’re Never Too Young

When that time comes, having a power of attorney is a critical document to have. The power of attorney is among a handful of estate planning documents that help with decision making, when a person is too ill, injured or lacks the mental capacity to make their own decisions. The article, “Why you’re never too young for a power of attorney” from Lancaster Online, explains what these documents are, and what purpose they serve.

There are three basic power of attorney documents: financial, limited and health care.

You’re never too young or too old to have a power of attorney. If you don’t, a guardian must be appointed in a court proceeding, and they will make decisions for you. If the guardian who is appointed does not know you or your family, they may make decisions that you would not have wanted. Anyone over the age of 18 should have a power of attorney.

It’s never too early, but it could be too late. If you become incapacitated, you cannot sign a POA. Then your family is faced with needing to pursue a guardianship and will not have the ability to make decisions on your behalf, until that’s in place.

You’ll want to name someone you trust implicitly and who is also going to be available to make decisions when time is an issue.

For a medical or healthcare power of attorney, it is a great help if the person lives nearby and knows you well. For a financial power of attorney, the person may not need to live nearby, but they must be trustworthy and financially competent.

Always have back-up agents, so if your primary agent is unavailable or declines to serve, you have someone who can step in on your behalf.

You should also work with an estate planning attorney to create the power of attorney you need. You may want to assign select powers to a POA, like managing certain bank accounts but not the sale of your home, for instance. An estate planning attorney will be able to tailor the POA to your exact needs. They will also make sure to create a document that gives proper powers to the people you select. You want to ensure that you don’t create a POA that gives someone the ability to exploit you.

Any of the POAs you have created should be updated on a fairly regular basis. Over time, laws change, or your personal situation may change. Review the documents at least annually to be sure that the people you have selected are still the people you want taking care of matters for you.

Most important of all, don’t wait to have a POA created. It’s an essential part of your estate plan, along with your last will and testament.

Reference: Lancaster Online (May 15, 2019) “Why you’re never too young for a power of attorney”

Will Helps Avoid Problems and Expenses for Family

Having a will and an estate plan makes passing along assets much easier for the family. Having necessary documents like a power of attorney and a health care power of attorney lets the family make decisions for a loved one, who has become incapacitated. These are estate planning basics, as reported by WKBN 27 in the article “Attorney recommends everyone have a will in place to prevent avoidable issues.”

Think of the will as a way to speak for yourself, when you have passed away. It’s the instructions for what you want to happen to your property, when you die. If there’s a will, the executor is responsible for carrying out your requests. With no will, a court will have to make these decisions.

Many people believe that if they don’t have a will, their spouse will simply inherit everything, automatically. This is not true. There are some states where the surviving spouse receives 50% of a decedent’s assets and the children receive the rest. However, the children could be offspring from outside the marriage. Not having a will, makes your estate and your family vulnerable to unexpected claims.

A will must contain certain elements, which are determined by your state’s laws and must be signed in the presence of two witnesses. Without the correct formalities, the will could be deemed invalid.

Lawyers recommend that everyone have a will and an estate plan, regardless of the size of your estate.

Young parents, in particular, need to have a will, so they can name a person to be guardian of their child or children, if they should both die.

Details matter. In some states, if you make a list and neglect to name specifically who gets what, using the term “children” instead of someone’s name, your stepchildren may not be included. State laws vary, so a local estate planning attorney is your best resource.

You should also be sure to talk with your spouse and your children about what your intentions are, before putting your wishes in writing. You may not feel totally comfortable having the discussion. However, if your intention is to preserve the family, especially if it is a blended family, then everyone should have a chance to learn what to expect.

Wills do become binding, but they are not a one-time event. Just as your life changes, your estate plan and your will should change.

Don’t neglect to update your beneficiary designations. Those are the people you named to receive retirement accounts, bank accounts or other assets that can be transferred by beneficiary designations. The instructions in your will do not control the beneficiary designation. This is a big mistake that many people make. If your will says your current spouse should receive the balance of your IRA when you die but your IRA lists your first wife, your ex will receive everything.

Here are the four estate planning documents needed:

  • A will;
  • A living will, if you need to be placed on life support and decisions need to be made;
  • A healthcare power of attorney, if you cannot speak for yourself, when it comes to medical decisions;
  • A durable power of attorney to make financial decisions, if you are incapacitated.

A local estate planning attorney can help you create all of these documents and will also help you clarify your wishes. If you have an estate plan but have not reviewed it in years, you’ll want to do that soon. Laws and lives change, and you may need to make some changes.

Reference: WKBN 27 (March 14, 2019) “Attorney recommends everyone have a will in place to prevent avoidable issues.”