Durable Power of Attorney – What Is It And Do You Need One?
A Durable Power of Attorney Can Provide Peace Of Mind, Comfort, and Ease of Transition For Families
As baby boomers approach retirement age there are many considerations which should be addressed regarding preparation for transitions and changes in their lifestyle. Generally, most people will have to rely on others to help them at some point in their lives, whether it’s daily or periodic help. Additionally, unforeseen circumstances and events can transpire which can lead to disruption in their daily or future routines. In order to be prepared everyone, including children of senior baby boomers, should understand what a Durable Power of Attorney (POA) is, and consider having them in place as soon as reasonably possible.
A Durable POA is a legal document which allows a person, the “principal”, to grant or designate a relative or friend as an “agent” to handle very specific health, legal, and financial responsibilities. There are two basic types of POAs which are described below.
Types of Power of Attorneys (POAs)
Healthcare POAs grants an agent the authority to make health care decisions on behalf of the principal. For example, the POA will have directives, specific or general, to the agent regarding processes and procedures in the event of a health care issue occurring to the principal. For example, if the principal becomes incapacitated the POA will provide direction to the agent to proceed according to the principal’s wishes.
Financial POAs grants the agent the authority and power to make legal and financial decisions on behalf of the principal upon some certain conditions occurring.
Preparation Is Powerful and Crucial
It is imperative that families prepare these documents well in advance of a principal becoming incapacitated or becoming incapable of reasonably handling their affairs. Importantly, at the time of execution of the POA the principal must be capable of independent decision making. For example, a principal in late stages of Alzheimer’s disease will not be able to execute a POA.
Similar to a trust, a Durable POA can be written so that the power of attorney responsibilities occur immediately. Alternatively, the POA can require a condition precedent, such as the powers go into effect only upon the incapacitation of the principal. Until such time the principal will continue to handle their own affairs.
Why Durable POAs Are Important
A Durable POA is critical for several reasons. If a principal becomes incapacitated or incompetent without preparing a POA, the principal’s family will not be allowed to make many important financial decisions like paying bills, or worse, like making important health care decisions on behalf of the principal. Additionally, the family would not be able to make crucial Medicare planning. The bottom line is that failing to prepare a Durable POA will require the family to hire an attorney, go to court, and petition the court to be officially deemed or appointed the principal’s guardian.
How To Create A Durable POA
A trust or estate planning attorney can be hired to counsel, advise, and draft POAs for you and your family. The specifics of the POAs can vary according to the wishes of the principal including various levels of decision making. The POA can grant the authority to pay bills and/or sell assets. It can also extend to all financial decisions, including selling the family home, managing all assets, and importantly, dealing with the Internal Revenue Service.
Mental Hurdles For Principals
Principals sometimes hesitate at the thought of first preparing, and second signing a Durable POA. The principal goes through the hard idea that they are losing control of their independence, and this is difficult to acknowledge for any human being. Moreover, the principal may fear that the agent will not carry out their wishes as the principal has directed. Although these hurdles exist it is important to get over these because the failure to execute a POA will be worse than the alternative. The most important things to be mindful of are: 1) choose an agent wisely and discuss the scope of the principal’s wishes with the agent prior to execution; 2) the POA is not irrevocable and can be changed, modified, and removed as long as the principal is competent; and 3) the failure to execute a Durable POA places unnecessary burdens on family members which can be prevented with a little up front work.
Learn More About Durable POAs
To learn more about Durable POAs you can contact a competent trust or estate planning attorney. I can provide a list of several very qualified local practitioners if you do not know one. I look forward to answering any questions you might have so don’t hesitate to contact me.