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 is 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 increase 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. While a young person’s incapacity might not be chronic as we see in dementia patients, they are likely to be incapacitated due to accident or illness!
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 an innovative idea. However, it comes with an issue and leads to MAJOR problems: for the springing POA to become active, there must be continual and ongoing proof of incapacity. Further, while you may jump through the hoops to prove incapacity today, the bank might well ask for it again the next time! How do they know the principal is still incapacitated TODAY? Depending upon your state, this may require a court to review documents attesting to your incapacity from a physician or health care provider. However, 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 is optimal to name someone who lives nearby in case there is an emergency and decisions need to be made in a timely manner.
While it is tempting to simply download a form from the internet, the POAs are best prepared with a certified and experienced 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. We tailor our POA forms, and they are always being reviewed and updated based on new cases or laws we learn about! A 'one-size-fits-most' can lead to many unexpected headaches ad
It is 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. We can also recommend trusted vendors that can step in along with the Agent or Executor to handle digital assets as the need arises. Contact us to learn more!
If you do not have POAs, or if your POA was executed more than three years ago, call us and let us draft your POAs or review them to ensure they will accomplish both in the short-term and in the long-term what you will need in case of emergency! Schedule a consultation and we can discuss your planning options! If you or a loved one are concerned about issues with situations like this in estate planning and elder law concerns including Asset Protection/Medicaid Planning and questions regarding long-term care and the nursing home, reach out to us! Book a call with us on our website: www.VAElderLaw.com to get started. We have offices in Bassett, Danville and Lynchburg to serve you.
Reference: Farm Progress (Oct. 18, 2022) “Often overlooked estate planning issues: Powers of attorney.”