Preparing for a successful transfer of wealth to your loved ones begins with a comprehensive…
Establishing a power of attorney is essential when preparing for a time when you may become incapacitated and need a trusted agent to manage your affairs. You can grant broad authority to one or more power of attorney agents to transact business or make medical decisions based on your behalf.
What are the different forms of a Power of Attorney?
A “power of attorney” and “limited power of attorney” may manage your affairs until you are legally considered incapacitated or incompetent. The word “limited” narrows a power of attorney’s authority to transact business only to a specific property or with an agent’s limited access to funds. A “durable power of attorney” remains in effect until the principal revokes the document or upon their death. A “springing” durable power of attorney will not go into effect until a doctor certifies the principal incapacitated, allowing you to keep control over your affairs until you are unable. A “medical power of attorney” is always durable and permits healthcare decisions on behalf of the principal. The document includes sections similar to a living will, guiding the agent and doctors’ medical decisions to the principal’s wishes.
Like your will, durable power of attorney documents requires drafting according to the state laws you live in and some forethought of your selection of agents. Every state has laws governing the creation and use of valid power of attorney documents. Does your state abide by The Uniform Power of Attorney Act of 2006? This Act intends to standardize the approach, provide safeguards for the principal, and eliminate differences between state laws. As of 2019, twenty-six US states abide by The Uniform Power of Attorney Act. Residents of multiple states and snowbirds who routinely travel and transact business in other states may benefit from creating a valid durable power of attorney documents in both states.
Take note that if your spouse is your power of attorney, this designation does not automatically end when you finalize a divorce between you unless you live in these twelve states: Alabama, California, Colorado, Illinois, Indiana, Kansas, Minnesota, Missouri, Ohio, Pennsylvania, Texas, Washington, or Wisconsin.
What to Consider when Appointing a Power of Attorney
When appointing a power of attorney, the agent you select is a personal decision. There are things to consider, such as if your adult children are trustworthy and mature in handling finances and medical decisions on your behalf. Some adult children move away or lose touch and are not necessarily suitable candidates simply because they are your children. You may select a contemporary friend who becomes disabled themselves or pre-deceases you, so you must have a backup agent in the documentation. Always make the decisions regarding your power of attorney selection while you are in good mental and physical health.
What Role Does Your Financial Power of Attorney Play?
A financial power of attorney can have the authority to perform some or all of these tasks:
- Pay everyday expenses for you and your family with your assets
- Maintain, pay taxes on, sell, buy, and mortgage real estate and other property
- Collect government benefits including Medicare, Social Security, Disability, and more
- Invest your money in mutual funds, stocks, and bonds
- Transact with banks and other financial institutions
- Buy and sell annuities and insurance policies on your behalf
- File and pay your taxes
- Operate your small business
- Claim inheritance or other property to which you are entitled
- Transfer property to a trust you created
- Hire someone to represent you in court
- Manage your retirement accounts
There may be other actions necessary to perform; however, the above list constitutes significant duties. Your agent must act in your best interest, keeping accurate records and avoiding conflicts of interest.
What Role Does Your Medical Power of Attorney Play?
Your medical power of attorney is one type of health care directive that outlines your healthcare preferences if you are too ill or injured to do so. The agent you select must be trustworthy and mature in overseeing your medical care and healthcare decision-making. Your healthcare agent will coordinate with doctors and other healthcare providers, ensuring you receive the medical care you prefer. To make these preferences clear, you may choose to use the second type of healthcare directive known as a “living will” or “healthcare declaration.” In this document, you can make clear your healthcare preferences. In some states, medical power of attorney and healthcare declaration combine into one form known as an “advance health care directive.” With this information, your agent is legally bound to comply with your treatment preferences to ensure they are made aware in the documentation.
Choosing your agent well, appointing backup agents, and tailoring your documents to your needs and specifications can take away a lot of worry about your future care and well-being. Having valid power of attorney documents avoids guardianship issues, which are time-consuming, expensive, and limit freedoms. An elder law attorney can address any questions or concerns you may have about establishing power of attorney documents for your particular needs. If you have questions or would like to discuss a personal legal matter, don’t hesitate to reach out. Contact our Chicago office at (312) 641-9500.