Estate planning is not only about the distribution of your assets after your death. It is also about protecting your wishes in the event that you are living but unable to make decisions on your own.
For good reason, financial advisors and doctors are only required to answer to you – their client and patient. If you become incapacitated, they continue down the path they deem necessary to manage your assets or to save your life. It doesn’t matter if you experience an emergency or are preparing for long-term care. Advisors and doctors will not trust anyone who steps in on your behalf unless you have previously granted them power of attorney (POA).
Power of Attorney: The Basics
Power of attorney is a legal document in which you, the principal or grantor, define an agent to act on your behalf in medical and/or financial situations if you are not capable of making the decisions yourself. A power of attorney can cover two areas: your finances and your healthcare.
A POA for finances can step in financially as you – they have access to manage your bank accounts, pay your bills, and have the power to take steps to protect your assets if you enter a long-term care facility.
A POA for healthcare can make decisions on your behalf related to life-saving treatment options only if you are incapacitated. As long as you can make your own healthcare decisions, you are required to. An agent designated as your healthcare POA has been informed of your wishes in the case that you are incapacitated and ensures those decisions are made on your behalf.
Immediate vs. Springing Financial POA
When designating an agent as your power of attorney, you can decide if you want the POA to take effect immediately upon the document completion, or if the POA will only spring into action in the event that you are incapacitated. This is an important distinction, especially if your agent is not immediate family.
In most cases, a spouse will have immediate POA because they are up to speed on your finances and may already have access to your accounts. An immediate POA allows the agent to act as you even when you are still capable of handling your own finances. This can be particularly convenient in cases of dementia, where there may be times when you can make decisions on your own and times you cannot, and you are not yet considered legally incapacitated. Or if you are entering a senior living facility and would like your child to help with financial management moving forward.
A springing POA takes effect after a requirement of proof of incapacitation is fulfilled. This type of POA is ideal for an agent who you do not want to manage your finances unless you are unable to make decisions for yourself. A springing POA is also recommended as a back-up plan in the case your spouse and/or immediate POA is unable to step in.
Getting the Timing Right with a POA
It is important to note that you can only make arrangements for powers of attorney when you are in good health and of sound mind. And, POAs are to protect you only while you are living. They cease after your death, so the agent will have no legal authority to execute your estate.
POA as Part of a Holistic Estate Plan
Power of attorney is one critical piece in a holistic estate plan that protects your assets, and most importantly, your wishes, while you are living and after you have gone. A holistic estate plan is also crucial to make any transition seamless for your loved ones as they step in to handle your affairs.
Block Legal Services has the expertise you need for a holistic approach to estate planning, including creating trusts, wills, and POAs, and representing clients in probate and estate administration. Schedule an initial consultation today to see how we can help.