Do you need a power of attorney? Where estate planning is concerned, you might say the entire field is about making decisions about how you would like the future to look. When people make a will, they mean to cast their intentions into the future – to do what little they can to shape the world for the better after they have ceased to need their worldly possessions. But death is not the only future event we need to be ready for. Sometimes events can occur that leave us incapacitated in one way or another, in which case the world is still very much with us. In these situations, one way to handle things is via a Power of Attorney (POA).
What is a Power of Attorney?
Broadly defined, a Power of Attorney is a legal document crafted to give another person—who is referred to as your “proxy” or “agent“—the legal authority to make crucial decisions regarding your life or situation when you are unable to do so. Powers of Attorney come in many different flavors, so to speak, but there are two broad categories for POAs.
One type of POAs are Medical POAs. Sometimes also referred to as Healthcare POAs, these forms of POA empower your proxy to make healthcare decisions for you, including which hospitals or doctors may administer your care, whether to have a surgery, which medications you should receive, and even what form of end-of-life care you will have.
Another type is a Financial POA. This limited form of POA grants your proxy the authority to make decisions on your behalf concerning particular aspects of your financial situation—your property and your money. For example, you can give them the right to file your taxes, deposit and withdraw money from your bank account, manage your retirement benefits, pay your bills, and so on. Any of these elements and other special powers like gifting or creating trusts can be added in or carved out as reflect your wishes.
But which of these is most commonly used in estate planning? Both of them are and both really need to be part of a good estate plan. Otherwise you leave your family without the tools to help care for you and manage your assets during periods of incapacity. Sometimes, people worry about creating POAs and giving up control. But remember you still always have control to revoke and change who you have named or the powers you have given them as long as you have the mental capacity to create a new document. Also, there are guardrails, or they can be added, to POAs to add a layer of protection.
The Medical POA only takes effect when someone is incapacitated. For the Financial POA, the power can be made “springing.” This means instead of going into effect immediately upon signature, the agent can only use the Financial POA if the person who created it is incapacitated. In other words, the Financial POA “springs” into action when the person who created it cannot act any more. These springing provisions typically require an official determination by a doctor that one is legally incapacitated. So, while a springing Financial POA may feel like a safer option, it can slow things down, and can result in negative repercussions such as unpaid bills. Whether to create a springing POA is a decision that must be made carefully for estate planning purposes. Importantly though, a “durable” Financial POA continues to work even after one becomes incapacitated. By statute, all Financial POAs in Virginia are automatically durable unless the document says otherwise.
We Can Help You Establish a Power of Attorney
If you want to plan for your future, attend one of Promise Law’s free estate planning workshops. These workshops provide a great foundation of information that everyone needs to make sound planning decisions. Moreover, if you attend a workshop, you also get a complimentary one-on-one consultation with one of our attorneys.