"I've got the power!" Powers of attorney demystified...

[Is the 1990s pop song stuck in your head yet?]

It seems that powers of attorney are sometimes treated as an afterthought in the world of estate planning, but they are documents that anyone over the age of 18 should really have in place. They aren’t just for worst case scenarios; there are lots of reasons why you may benefit from getting one done.

There are two basic types of powers of attorney: financial and health care. These documents may have different names in different states, but their purpose is pretty much the same. They each allow someone else to step in as your agent and make important decisions for you when you can’t. And that person doesn’t have to be an attorney.

Let’s take a closer look at these two documents….

1) Durable Power of Attorney (financial) – The person who holds this for you can take care of any of your financial or contractual affairs for you if you are unable for any reason. That could be because of a health emergency (a coma, amnesia, a traumatic brain injury, a mental health crisis), or simply because you are traveling and unavailable. They can write checks on your behalf, move money in or out of your bank accounts, negotiate with your landlord, or do just about anything you say they can do for you. That’s a lot of power, isn’t it?!

So choose who receives your power wisely!

You can create a broad durable power of attorney so someone can take care of all of your affairs if you’re incapacitated, or you can create a limited one so someone can take care of limited things – like take your kid to the doctor while you are on vacation or sign documents for you at a real estate closing. The choice is yours.

2) Health Care Power of Attorney (a/k/a health care proxy) – This person will make medical decisions for you if you are unable to do so for yourself. The key to this power is that it kicks in only if you are incapacitated. Making medical decisions for you is a big responsibility, so it is important to let the person you name know what you want them to do. And then have some meaningful conversations to ensure they know your wishes for your medical care and will be prepared to honor them.

Generally speaking, you should come up with at least 3 people you would like to have step into these important roles if a situation ever warrants it. One named person definitely is not enough, because if they are unavailable, then your family will have to decide who will serve as your agent instead – and then go to court to get that person appointed. It is so much easier to name some just-in-case alternatives.

Also, keep in mind that these documents work ONLY if you are incapacitated. They are NOT a substitute for a will or a trust, both of which are documents that communicate what you want to have happen to your stuff when you’re gone. Once you’re gone, the powers of attorney no longer work.

If you want to learn more about all the components of a comprehensive plan (and how to get yours done), you can book a free call to learn more, or go straight to booking your own 2-Hour Family Asset Planning Session, where we take a deep look at your own situation and develop a legacy plan together based on the wishes, assets, and values you want to leave behind for your own loved ones.