Preparing for the unexpected isn’t unique to estate planning. There are many things you have in place just-in-case. You won’t drive a new vehicle off the lot without a call to your auto insurance company. Your property coverage includes worst-case scenarios. You probably have a will or trust, ensuring your loved ones won’t be buried in paperwork if you die unexpectedly. But, do you have power of attorney in place?
Power of Attorney: A Powerful Directive
A power of attorney (POA) allows you to appoint someone, an “attorney-in-fact,” to manage your affairs if you become unable to do so. There are different levels of control from which you can choose to include in your document. It’s important that you create, review, and sign the POA before you are legally incompetent.
Who Needs a POA?
As long as you remain competent, you can change or revoke a power of attorney at any time. However, if you become physically or mentally incompetent, your power of attorney may be your most valuable tool.
You need a power of attorney in place if:
- A pending buy/sell agreement will be in jeopardy or lost while you are incapacitated.
- Business transactions will be in jeopardy if you become incapacitated.
- Your finances will be better managed by someone else if you are physically or mentally incapacitated.
- Your property will fall into default due to a lack of payment or other money mismanagement if you become incapacitated.
Types of Power of Attorney Documents
A durable power of attorney continues to be valid if you become unable to make decisions for yourself.
A general POA document that doesn’t explicitly say “durable” ends if you become incapacitated or unable to communicate. You can create the document so the POA takes place immediately and continues during your incapacitation. Or, you can specify that it only begins upon becoming incapacitated.
Imagine you are diagnosed with Parkinson’s disease. Many patients have a stable mental state for years while dealing with physical symptoms. However, eventually, many deal with cognitive impairment. As long as you are legally competent, you can create a durable POA allowing your designated person to begin managing your affairs immediately and throughout your illness. Having this document in place can give both of you time to adjust to them handling your affairs. It can also provide you with peace of mind to know that everything will be in order when you can no longer manage it.
You can cancel a general POA at any time or for any reason. This would be especially necessary if your attorney-in-fact violates or takes advantage of their assigned power. However, you can only revoke a durable POA while you have the legal capacity to act. If you become incapacitated, someone else will need to petition the court to appoint someone new.
If you think you’re too young to need a POA, think again. Whether you’re thinking about your vehicle, your home, or your health, you never know when an accident or disaster will strike. A power of attorney can give you peace of mind that should something occur, your affairs will continue to be managed.
It’s important to select someone you completely trust when choosing your attorney-in-fact. This person will have the legal authority to act on your behalf. No matter how much you like them, it shouldn’t be someone who makes emotionally-driven or poor decisions.
Here are a few additional pointers when thinking about your POA:
- Don’t name all three kids as your attorney-in-fact because you don’t want to hurt someone’s feelings. Pick one person and one backup.
- If you suspect your attorney-in-fact is taking advantage of your POA, act quickly. Damage control is a problem, but losing everything is a catastrophe.
- The POA is no longer in effect when you die. Your will then becomes the legal authority, not your POA. Work with a trusted attorney to make sure your estate plan is complete.
- Wording is critical. You can’t risk using vague terminology in a legal document. Be sure to rely on legal guidance.
- You’re not signing-away your power to manage. You’re simply naming someone to act on your behalf under specific circumstances.
- Your POA should never benefit anyone except you. There should be no incentive for your attorney-in-fact to capitalize on this document.
A power of attorney is not about how much money or assets you possess. It’s about risk management; you have something to lose without a POA. Contact Ogborne Law to learn more.
Engaging with an attorney to protect your family is never an easy step. Whether you need to protect your family from the unthinkable or restructure your family through collaborative divorce, we’re here to help. When you’re ready to schedule a consultation with Michelle Ogborne, please visit the scheduling page to get started.