Powers of Attorney: The Estate Planning Tools Every Adult Should Have

A Financial Power of Attorney and Health Care Power of Attorney are two very important estate planning documents. Without such powers in place, an individual is open to a guardianship action in the event of an accident, prolonged illness or mental incapacity. Guardianships can be costly and may work against any planning the individual has already done. The likelihood of illness or incapacity is far greater than sudden death.

In fact, seventy percent of people turning age sixty-five can expect to use some form of long-term care during their lives. Additionally, 5.8 million Americans are living with Alzheimer’s. By 2050, this number is projected to rise to nearly 14 million. Dementia is one of the leading causes of dependency and mental impairment among the elderly population Therefore, the General Durable Power of Attorney for Finances and the Health Care Power of Attorney are more important than any other documents an estate planner may prepare.

Any client seeking only a “Will” is doing themselves a serious disfavor.

The General Durable Power of Attorney for Finances is considered general because the powers are broad and sweeping encompassing banking, insurance, taxes, real estate, gifting, and operation of a business to name a few areas. It is durable because the authority granted in the document continues in effect through incapacity until death, unless revoked. The power of attorney can be either springing or effective immediately upon signing. If it is springing in nature, then the powers enumerated in the document only spring into effect at such time as the principal (the individual granting the authority) chooses to make it effective, or upon the incapacitation of the principal. Incapacity is a medical determination indicating a person can no longer receive or evaluate information.

As it relates to the Healthcare Power of Attorney, this document by default is springing. As long as a person remains able to communicate to their doctor and understand their healthcare needs, they will continue to make those decisions independently.

Powers of Attorney are appropriate documents for individuals over the age of 18 and of sound mind. It is important that the agent, the person receiving the authority, understands the document. The agent does not do what the agent wants to do, but steps into the shoes of the principal. When a person steps into the shoes of another this creates a fiduciary relationship, and the agent owes the principal the duty to act prudently and in the principal’s best interest.

Even though the law provides a legal duty to act in the principal’s best interest and criminal and civil consequences exist for those who breach such duties, the most proactive step one can take is to select someone who is trustworthy, competent and available. Choosing someone who is trustworthy is about character and integrity. It may be natural to select a son or daughter, but unfortunately in some circumstances the adult child is not fit to manage the money if they cannot manage their own or worse, have been found guilty of financially related crimes.

Similarly, as it concerns competence, one must consider whether the proposed agent is mentally capable and has the knowledge base to handle the financial affairs. This may be as basic as checkbook balancing or issues more complex like assisting with a closely held corporation. Lastly, from a practical standpoint the agent should be reasonably close and available to administer the duties effectively.

As mentioned previously, seventy percent of people turning age sixty-five can expect to use some form of long-term care during their lives and Dementia is a growing epidemic. Dementia is one illness alone, and does not cover the vast amount of individuals impacted by a stroke, heart attack, or unexpected tragedies that can render a person incapacitated. If one does not put a plan in place, it does not mean the potential problem goes away. Either, we can be proactive to create and develop the best plan for our lives, or allow others to make those decisions subject to Court jurisdiction.

Planning is necessary and must be a priority regardless of the size of your estate. If you do nothing, it can result in a poor quality of life. These issues are complex and nuanced, but an over-arching takeaway from this article is that this journey should not be navigated alone. As we all age and build our lives, it is important to foster healthy relationships with family and friends and have a sense of connectedness in the community and world around us. It is equally beneficial to build relationships with a close team of professionals that will help us stay informed and enable us to age as gracefully as possible.

 

This article was written by Attorney Jennifer Imediegwu from Milwaukee Courier and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.