First of all, happy Fourth of July! In honor of the holidays and those who have made it possible, especially our troops, I want to focus on power of attorneys. Now I understand the connection between the armed forces and a power of attorney may not be completely obvious, but let me explain. When out of the country for any reason, most people want to have their estate planning documents for understandable reasons. But when you’re going overseas unsure of when you’re going to return and without easy communication, it’s a different story. You need someone with authority over your bank accounts, insurance, maybe even your house. This is where the power of attorney comes in.
The person making those decisions is called the agent or attorney and fact and the person actually making the document is sometimes referred to as the principal. Now, power of attorneys come in many different forms and for many different decisions.
There are two types of power of attorneys that are important for most families’ estate plans: a springing power of attorney and a durable power of attorney. A springing power of attorney only grants the agent the power to act for the person when a certain event occurs. Hence the springing. Generally, this occurs when two doctors certify that the person is unable to make decisions for themselves. This is how I write the majority of the power of attorneys because most families do not need another person able to make decisions over their money and assets. It also avoids problems when there are conflicting instructions between a person completely capable of making decisions and their agent. Now, if you are going out of the country and someone needs to be able to access and make decisions for your account, you do NOT want a springing power of attorney. However, that’s a more detail analysis an attorney can help you make on an individual basis.
The durable power of attorney allows the agent to act for a person if they are incapacitated or if it is unsure whether they are dead or alive. Because many people execute these forms to plan in case of incapacitation, it’s extremely important to make sure the document has the “magic” language of a durable power of attorney. As I said before, I generally help my clients with a springing power of attorney. But I also include the magic durable power of attorney language.
Most people need a financial/legal power of attorney AND a medical power of attorney. They do not need to be separate documents, but normally are because some people want different friends/family making financial decisions and medical decisions. Whether it’s one document or two, it’s important they are reviewed to cover most situations, ranging from banking to insurance to health care choices. A power of attorney may be drafted for almost any specific decision to give another the power to make that decision. I’ve reviewed documents to allow one sibling to sell a car for the other 6 siblings (much easier than 7 signatures).
What every power of attorney has in common though it’s no longer effective after death. Therefore the other estate planning documents (wills, trusts, etc) are extremely important. Also, without a power of attorney designating someone to make decisions, a person must go through the probate court to have someone appointed to make those decisions. A power of attorney is much easier and cheaper.
On a final note, people ask me when an estate plan is needed, and while many young people do not have enough assets to truly NEED a will, they certainly have the potential for medical issues and absolutely need a power of attorney no matter the age. Many clients even choose to execute a power of attorney for their minor children’s health care decisions so a grandmother or other trusted caretaker can act in the event of an emergency where the parent is not available. A great idea if the parents are extremely inaccessible (out of the country, etc).
So if you don’t have a power of attorney or have any questions, give me a call. Or at a minimum, take the time to execute a free medical power of attorney from the Missouri Bar (found here).