“Estate planning takes a lot of time, but another factor that needs to not be overlooked is having a power of attorney.”
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.”