In this topic, we cover:
Everyone faces the possibility of temporary or permanent incapacitation due to accident or illness. Many people assume their parents, spouses or children will automatically be allowed to make financial and/or medical decisions for them, but this is not necessarily so.
A power of attorney is a legal document that allows one person (called the "principal") to appoint someone else (the "agent") to act on his or her behalf. The powers that can be exercised by the agent can be broad or narrow and are stipulated in advance. You might, for example, authorize someone to do a specific thing such as sell your house or you might give them authority to do any legal act you would do yourself. If you become incapacitated and don't have a power of attorney, your family may have to go through lengthy and expensive legal action so that someone can act on your behalf.
There are several common types of powers of attorney:
For estate planning purposes, a durable power of attorney is generally used, since conventional powers of attorney expire, and it can be difficult to determine exactly when springing powers of attorney take effect. Some individuals have two powers of attorney - one for financial matters and another to deal with medical issues. You should consult with your attorney to determine which is best for you.
Signing a power of attorney does not mean you can no longer manage your own affairs. You are not giving up your right to act in your own behalf; you are ensuring that your agent will be able to act when and how you have directed - if it becomes necessary. Also, it's important to note that you can revoke, or cancel, a power of attorney at any time. You can destroy it or make a new one, and you do not need to give a reason for doing so. If you do make changes to your power of attorney it is a good idea to let all involved parties know of your decision - particularly your appointed agent and anyone they may be dealing with, as well as your attorney.
All powers of attorney automatically end when the principal dies. This means that after you die, your appointed agent will have no power to make decisions. Consequently, your agent's powers do not overlap with those of the executor of your estate.
Choosing a power of attorney agent is an important decision - you need to trust the person completely, and you need to make sure they are capable of performing the job. Make sure that the person you choose is willing to assume the responsibility. If you come up with a choice of more than one qualified individual, it might be a good idea to choose the one who lives nearest to you. Discuss your options with an estate planning attorney.
Medical Care Planning
Advance directives are written documents that tell your doctors (and to make clear to your family) what kind of treatment you'd like to have if you become unable to make medical decisions. Advance directives can take many forms, and the laws about them vary from state to state. We recommend you understand the laws of the state where you live when you write advance directives.
Living wills are a kind of advance directive that come into effect when a person is terminally ill. A living will does not give you the opportunity to select someone to make decisions for you, but it allows you to specify the kind of treatment you want in specific situations. For example, you might choose to specify that you do not want to be resuscitated if your heart stops.
A durable power of attorney for health care (sometimes called a durable medical power of attorney) specifies whom you've chosen to make medical decisions for you and is activated anytime you're unconscious or unable to make medical decisions. You need to choose someone who meets the legal requirements in your state for acting as your agent.
The person you name as your agent must:
Make sure to let family members and close friends know whom you've chosen as your agent. Death is a difficult subject to bring up, but it is a good idea to discuss these issues with family members to ensure that they understand your values and beliefs. The more communication you have with family members, the easier it will be for them to respect your wishes.
Advance directives don't have to be complicated legal documents - they can be relatively short statements about what you want done if you can't speak for yourself. Any advance directive must, however, comply with state laws. Written advance directives should also be reviewed by your doctor and your lawyer to make sure they fully understand your instructions. Once you've finalized advance directives, give copies to your family, medical power of attorney agent, and your doctor.
Other Options and Concerns
Depending on your assets, there are other estate planning strategies to consider. You should understand the many options available for trusts, for minimizing estate taxes, and for supporting charities. We suggest contacting a financial planner or attorney who specializes in estate planning for more information on these options.
Remember, estate planning is not something you do just once. As your life situation changes you will need to update the documents mentioned in this module or explore other estate planning options. The government also routinely changes rules regarding estate taxes, so it makes sense to periodically check in with your attorney or financial planner.