Whether your estate is large enough to require a comprehensive estate plan or small enough to need only a simple will, you should consider executing powers of attorney. The reason is obvious: if you become incapacitated, someone will need to act as a decision-maker on your behalf (a so-called "attorney in fact").
During what is indeed a very stressful time for your family, powers of attorney can save them considerable time, expense and frustration. For example, if you do nothing and become incapacitated (e.g., coma, long convalescence, debilitating terminal illness, etc.), your loved ones must petition the court to be appointed as your conservator before they can make your health care or financial decisions. But executing powers of attorney before you become incapacitated will not only save your family much aggravation, but also allow you to choose who will serve as your decision-maker for these important matters.
There are two basic types of powers of attorneys: a power of attorney for asset management and a power of attorney for health care decisions.
Power of Attorney for Asset Management
The power of attorney for asset management gives your appointed agent the power to make financial decisions on your behalf, without requiring court approval. The power of attorney can be effective immediately or "spring" into effect upon your incapacity.
You can determine the scope of your agent's powers. For example, a special power of attorney allows your agent to perform only specified acts, such as paying bills or signing tax returns.
Alternatively, you may execute a general power of attorney that gives your agent all of the powers available under laws of your state. Typically, a general power of attorney gives an agent the following powers:
- Power to purchase, sell or lease assets
- Power to pay bills
- Power to collect receipts
- Power to operate a small business
- Power to sue on your behalf.
Power of Attorney for Health Care Decisions
The power of attorney for health care decisions gives your appointed agent the power to make medical or surgical decisions on your behalf. This type of power of attorney is effective only when you are incapacitated and becomes ineffective when your health returns. In many states you can also authorize your agent to decide whether to terminate life support if your doctors determine that you are in a persistent vegetative state.
Fear that you may not trust your agent in the future should not prevent you from appointing an agent today. You can terminate powers of attorney at any time. You can also choose different individuals to serve as your agent for financial matters and health care decisions.
The concepts contained herein are not intended to serve as advice and may have legal, tax and accounting implications. Consult your Attorney and CPA for advice.
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