Why Is Power of Attorney So Important for Estate Planning?

One of the most overlooked and important documents in estate planning is the Power of Attorney. A recent article from Farm Progress, “Often overlooked estate planning issues: Powers of attorney,” explains how this document works and why it’s so important.

Most people will become incapacitated at some point in our lives, especially as we age. Some experts believe this number is as high as two-thirds of all Americans who, at some point in their lives, will become incapacitated. We are living longer and the chances of developing a condition to impair or rob us of the ability to make important health or financial decisions increases every year.

Powers of Attorney are just as important for young adults because the risk of disability or impairment is often actually higher than death for someone younger.

Designating a Power of Attorney gives you the control of choosing a trusted person to step in and act as your agent. A “Durable” POA remains in effect until it is revoked, or upon the death of the person who made it.

The person establishing the POA is the “principal.” The principal has the right to revoke the POA until they lack capacity to do so. The person or persons named to act for you through your POA is your “attorney-in-fact” or “agent.”

You may choose to have the POA in a “durable” form or a “springing” POA. The springing POA becomes effective only when you have been determined to be incapacitated. This sounds like a good idea. However, it comes with an issue: for the springing POA to become active, there must be proof of incapacity.

Depending upon your state, this may require a court to review documents attesting to your incapacity from a physician or health care provider. The durable POA is always in effect and your agent can step in for you immediately.

Everyone should also have a Health Care Power of Attorney, sometimes called a Health Care Proxy or a medical POA. The Health Care POA should be someone who can act quickly, so it’s optimal to name someone who lives nearby, in case there’s an emergency and decisions need to be made in a timely manner.

While it’s tempting to simply download a form from the internet, these two POAs are best prepared with an estate planning attorney, so they align with your state’s laws and your wishes. You may want someone to make all decisions for you, or you may want to limit their powers. Your estate planning attorney will be able to create a document to suit your specific needs.

It’s also important for your estate plan to address digital assets, since today so much of our financial and medical information is stored online. Your agent also needs to be able to access your digital life, to keep your life running smoothly and make informed decisions.

Reference: Farm Progress (Oct. 18, 2022) “Often overlooked estate planning issues: Powers of attorney.”

Do You Need a Power of Attorney?

Did you know estate planning attorneys recommend anyone over age 18 have a power of attorney? Without one, even a long-married spouse may not be able to make financial or medical decisions if their spouse became incapacitated, according to a recent article “How to Set Up a Power of Attorney” from U.S. News & World Report. Naming someone and having the documents created to make them a Power of Attorney (POA) is part of creating an estate plan.

If someone becomes incapacitated, someone else—a family member or the state—has to be able to make decisions on their behalf. People hesitate sometimes, as they’re not sure about giving someone the power to make decisions. However, lacking one leads to problems in emergent situations.

While the 18-year-olds are usually the most upset when they learn their parents wish to be named as their POA, it is because they don’t realize how mom and dad have no legal authority over them once they become legal adults.

State laws vary for powers of attorney, so it is important to work with a local estate planning attorney who can create a POA specific to your needs and following the laws of your state.

How to get started with a Power of Attorney

The first, and possibly hardest, part of a POA is determining who should be named. The individual needs to be responsible, trustworthy and calm in emergency situations. Just because someone is related to you doesn’t necessarily qualify them to serve in this role. You should also name a secondary POA, in case the first is unable or unwilling to act on your behalf.

Next, have your estate planning attorney draft the document, which typically works in connection with other estate planning documents including your will, health care proxy and HIPAA release forms. You should have a Power of Attorney for finances and a Health Care Power of Attorney for medical care.

Be careful about what happens to copies of the documents and where they are stored. Some estate planning attorneys create documents to be stored in a fire and water-proof box at home, in the safety deposit box at a bank, or in the attorney’s fireproof safe. Others say you should never put important documents in a safety deposit box in a bank, because if the documents are needed and the bank is closed, the person won’t be able to step up and act.

The POA needs to be kept up to date, just like any part of your estate plan. Some financial institutions will refuse to honor a POA if they consider it out of date. Every three to five years, this document should be updated. It should also be updated if the person named POA becomes incapacitated, dies, or moves to another state.

Should You Have a Durable Power of Attorney?

Powers of attorney typically end when a person becomes incapacitated, which is exactly when you want to have a POA. A Durable Power of Attorney can make decisions on your behalf, even if you become incapacitated.

What is a Springing Power of Attorney?

Power of attorney for finances or healthcare can be effective immediately when the documents are signed or take effect under predetermined circumstances, such as when the principal becomes incapacitated. This is known as a springing power of attorney because it “springs” into effect at a specific time. It seems like a good idea, but a word of caution: the springing power of attorney requires a doctor’s evaluation of incapacity. This often takes time, which can be the one thing you don’t have in an urgent situation.

Reference: U.S. News & World Report (July 21, 2022) “How to Set Up a Power of Attorney”

Is It Necessary to have a Medical Power of Attorney?
Close-up Of Stethoscope And Gavel On Wooden Desk

Is It Necessary to have a Medical Power of Attorney?

There’s no way around it, this is a difficult conversation to have with aging parents or loved ones. Who will take care of parents when they cannot take care of themselves? Do they have their estate plan in order? According to this article from Health, an important detail is often overlooked: “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why.”

Referred to as a health care proxy or a medical power of attorney, a health care POA allows a person to choose someone to make medical decisions on their behalf, if they are unable to do so. This is a different document than a living will, which serves to let a person outline their wishes if they can’t communicate for end-of-life care.

Naming a medical proxy in advance lets the person conduct their wishes, with full and complete knowledge of what those wishes are.

A health care POA is also not the same as a last will and testament, which goes into effect after a person dies. There is nothing in a health care POA concerning wealth distribution. The will and trusts address those matters.

Giving a trusted person the legal power to make medical decisions is a big step, but one that provides a sense of control and peace of mind. There should be a first choice and an alternate, in case the first person, usually a spouse, is unable or unwilling to serve.

Without a medical POA, the family may need to go to court to get legal permission to make decisions. It’s the last thing anyone wants to do when their loved one is in a critical medical situation. Imagine having to leave the hospital to go to court, when the minutes are ticking away and your parent is in the midst of medical crisis.

If someone fails to name a medical proxy and becomes incapacitated, the hospital itself will most often step in to make treatment decisions or rely on the rules of the state to pick a family member to make decisions. The person named by the hospital might not be the person the family wants, but it will have no choice.

Like having an estate plan in place, having a medical proxy in place eliminates a lot of unnecessary stress. Most parents name the adult children they feel will make decisions in their best interest. The responsible, dependable child, regardless of their age relative their siblings, is often named. If siblings don’t get along and have a history of fighting, it may be best to name a cousin or trusted family friend.

An experienced estate planning attorney will make sure the health care proxy documents comply with the laws in the person’s state of residence. Every state has its own forms, and its own laws.

A discussion needs to take place between the person and the people they name in the health care proxy. Make sure the proxy is willing to take on the role and understands the person’s wishes.  The form should also be submitted to a health care facility or doctor’s office, so it is on file if it is needed. Unexpected events occur every day—being prepared makes it easier for loved ones.

Reference: Health (Dec. 1, 2021) “A Health Care Power of Attorney Is Essential for Aging Parents—Here’s Why”

What Is an Advance Directive, and Why You Need This Document?

The coronavirus pandemic has had an impact on the entire world. No wonder—it’s a frightening disease that experts are just beginning to understand. Many of us are asking ourselves: Am I ready for a worst-case scenario? Anyone who does not have the health care portion of their estate plan in order, needs to address it now, says the timely article “COVID-19 crisis highlights the importance of completing advance directives” from Cincinnati.com.

The topic of an advance directive used to be introduced with a question about what would happen if a person were in a car accident, rushed to the hospital and unable to convey their wishes for care.  The question has now become, what if a sudden onset of COVID-19 occurred, and you were unable to speak on your own behalf? Would your loved ones know what you would want, or would they have to guess?

All adults—that is, anyone over the age of 18—should have an advance directive. The process of creating this and other health care-related estate planning documents will provide the answers to your loved ones, while helping you work through your wishes. Here’s how to start:

What matters to you? Give this considerable thought. What is important to you, who best knows and understands you and who would you trust to make critical decisions on your behalf, in the event of a medical emergency? What medical treatment would you want—or not want—and who can you count on to carry out your wishes?

Get documents in order, so your wishes are carried out. Your estate planning attorney can help you draft and execute the documents you need, so you can be confident that they will be treated as legitimate by health care providers. The estate planning lawyer will know how to execute the documents, so they are in compliance with your state’s laws. Here’s what you’ll want:

  • A living will, which records your wishes for medical treatment, if you cannot speak on your own behalf.
  • Medical power of attorney, to designate a person to make health care decisions, when you are not able to do so. The person is referred to as an agent, surrogate or proxy.
  • A HIPAA release form, so the person you designate may speak with your medical care providers.

Note that none of these documents concerns distribution of your personal property and assets. For that, you’ll want a will or revocable living trust, which your estate planning attorney can prepare for you.

Talk to loved ones now. Consider this conversation a gift to them. This alleviates them from a lifetime of wondering if they did the right thing for you. Have a forthright conversation with them, let them know about the documents you have had prepared and what your wishes are.

Reference: Cincinnati.com (April 27, 2020) “COVID-19 crisis highlights the importance of completing advance directives”