The Benefits of Having a Power of Attorney in Place

Often times we think about having a “Power of Attorney” (POA) when there is some major or catastrophic situation occurring in someone’s life. While this is important, it is only one reason for having a Power of Attorney in place. It is one of the most powerful, and needed, legal documents anyone can have in place. It is literally allowing someone to act on your behalf when you can’t.

For me, I believe everyone needs to have one in place. We never know from one minute to the next what might happen and after something happens is not the time to think about putting one in place…it’s often too late. And when you think about your own situation, who would be in charge of your medical decisions, your assets, and other critical decisions should you become incapacitated or even die? Not having a Power of Attorney simply adds extensive risk to your personal life when it can easily be taken care of in a short period of time.

College student or business owner, young parent or retiree, you need a power of attorney. They are also an important part of your estate plan. According to the article “Designating powers of attorney: Selection, documentation, and communication best practices” from Benefits Pro, having a power of attorney in place, is something that is needed by adult Americans at all stages of life.

Adult children, in college and in their early adult years, need a health care POA so their parents can interact with doctors and be involved in their health care decisions. A business associate needs a non-durable POA to sign a document on behalf of a business owner if they happen to be out of the country or away on business. A family member needs a POA to manage your own personal affairs in case you are temporarily or permanently incapacitated by illness or injury.

The point here is that while often times we think of POAs for the elderly, they are not just for seniors. Accidents, illnesses, and even business situations occur where having a POA in place simply makes good sense. It gives you some additional peace of mind for those times when you need to have someone step up and take care of things and can’t make these decisions on your own.

As you can see from the examples above, there are different kinds of Powers of Attorney. So the question you should ask is who needs a POA and what kind of POA do they need?

A Power of Attorney (POA) is simply legal document giving someone you name the power to make decisions on your behalf. Without it, no decisions can may be made on your behalf until a court proceeding is held and there is a person appointed by the court. This is why it is important when you name a POA you chose a person who you trust implicitly to manage your affairs or make decisions on your behalf and the way you would want them to be made.

Essentially, there are two basic types of Power of Attorney…a financial POA and a health care POA.

A financial POA can take care of specific things you specify and for a certain period of time or they can handle all financial matters on your behalf. This includes paying bills, writing checks, opening and closing accounts, filing tax returns, buying and selling property (including real estate as well as investments, like stocks and bonds), or reallocating a portfolio.

But one thing that a POA can’t typically do is to give the person authority over beneficiary designations. This is a point of protection so the person cannot name someone, other than the person who was chosen by the account owner, to receive certain assets. There are exceptions to this so it so it is important to check with your estate planning attorney about your state’s rules.

The health care POA performs in a similar way only relating to health care issues. A healthcare POA can make health care decisions on your behalf if you are unable to do so. This may include life-sustaining treatments or whether to admit you to a hospital or other kind of care facility, for example.

Another necessary document is a Living Will, otherwise known as a Medical Directive or Declaration to Physicians. This document is solely focused on indicating whether a feeding tube or other life-sustaining measures should be taken.

The health care POA agent is required, by law, to follow the instructions in the Living Will unless the two contradict each other. In they are contradictory, a court ruling may be required to determine which actions should be followed. It is possible that the court would rule in favor of the most recently created document.

Any POA can be durable or nondurable. Durable means the powers associated with the POA remain in effect after the person becomes incapacitated. Nondurable means the powers cease when the person becomes incapacitated. For a specific goal, like signing a document if you are out of the country, a nondurable POA can work. Otherwise, you’ll want a durable POA.

Speak with your estate planning attorney about the different types of POA and which ones would be appropriate for you and your own personal and business situations. It is important to understand and describe the situations in which they are applicable so you can select a POA agent. These are important decisions and should not be made lightly. Make sure to communicate to your named agents what your wishes are and make sure your POA documents define exactly what powers the agents will have. And it’s always a good idea to get their approval and their willingness to act on your behalf in these particular situations.