No one wants to think about a day when they can no longer conduct their own affairs. But you’ve probably heard stories about people experiencing unexpected health issues that temporarily, or permanently, keep them from exercising their independence. In these situations, it’s important to have a plan in place—to protect yourself and your legacy.
Appointing a power of attorney (POA) as part of your is a great place to start. A POA is an individual (typically a family member or trusted friend) who has the authority to make decisions on your behalf when you are not physically or mentally capable of doing so. By making this decision now, you can ensure that someone you trust is acting in your best interests if, for whatever reason, you are unable manage your own affairs. It can also alleviate extra stress if you find yourself in the throes of an already-difficult situation.
Types of Powers of Attorney
When appointing a POA, you have three basic options: medical power of attorney, financial power of attorney, and general power of attorney.
A medical POA can help ensure that healthcare decisions are based on your choices and preferences, even if you can’t communicate them yourself. The person authorized to act as your medical POA can:
- Make decisions about the medical care you receive, including hospital care, surgery, psychiatric treatment, home health care, and more. (These choices are dependent on your financial means and the approval of your financial POA.)
- Choose which doctors and care providers you use.
- Determine where you live. This includes decisions regarding residential long-term care such as assisted living, memory care, and skilled nursing facilities. (Again, you must be able to afford the living arrangements, and the financial POA must approve these costs.)
- Identify your dietary requirements, if you are in assisted living or nursing care.
- Establish who takes care of your personal needs.
A financial POA manages your financial affairs if you can’t. The person authorized to act as your financial POA can:
- Access your financial accounts to pay for healthcare, housing needs, and other bills.
- File taxes on your behalf.
- Make investment decisions on your behalf.
- Collect any debt payments owed to you.
- Manage any property you own.
- Apply for public benefits for you, such as Medicaid and veterans benefits.
If you want one person to have the ability to handle both financial and medical decisions, you can appoint a general power of attorney.
While the POA designation does give an individual the authority to make many decisions on your behalf, you may be wondering what a power of attorney can’t do. A POA cannot:
- Change your will in any way.
- Break their fiduciary duty to act in your best interest.
- Make decisions on your behalf after your death. (The only exceptions are if the power of attorney has also been named as the executor of your will or if you die without a will and the power of attorney then petitions to become the administrator of your estate.)
- Change or transfer POA duties to someone else. An appointed POA has the right to decline their appointment at any time. However, unless you named a co-agent or alternate agent in the same POA document or are still competent to appoint someone else to act on your behalf, a power of attorney cannot choose who takes over their duties.
- Act for you as the trustee of a trust, unless you have provided specific instructions within the trust document identifying the duties the power of attorney is authorized to perform.
These lists may not encompass every duty (or limitation) of a POA, but it gives you a better picture of why the role is so critical.
Establishing a POA for Your College Student
Parents, as your children head off to college, it’s good to remember that 18-year-olds are considered adults in 47 out of 50 states. You may want to establish a power of attorney for your child before move-in day. Even as the parent, you would need POA status to have access to information and be able to step in as a voice for your adult child if needed.
The Importance of Appointing a POA in Advance
Adding a POA to your estate plan now can give you and your loved ones clarity and comfort in case the unexpected happens. It means they can avoid facing potentially lengthy legal processes to gain control of your finances and healthcare decisions. Appointing a POA can also help to prevent family disputes and ensure your wishes are respected.
Ready to get started on your estate plan? We are here to support you every step of the way.
Scott Berryman is a non-registered affiliate of Cetera Advisor Networks, LLC.
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