The benefits of financial and healthcare powers of attorney
When you create a power of attorney (POA), you create a legal document giving someone the legal authority to make decisions and act on your behalf. Many people incorporate this document as part of their “advance planning” or estate planning. By outlining the POA rights you want to assign and identifying the people (known as an “agent” or “attorney-in-fact”) to whom you wish to assign them before you actually need to exercise the POA, you benefit in a couple of ways.
First, you’ll be choosing someone you trust to handle important life decisions in a private and relatively low-cost manner. Second, if you find yourself no longer able to handle your financial or medical decisions, and you have not appointed an agent, another family member may apply for guardianship. This is a complicated and costly process, potentially resulting in a guardian that you wouldn’t otherwise have chosen.
Finally, planning ahead by putting POAs in place may eliminate costly court action for guardianship, as well as the possible strain amongst family members and delays on important procedures or decisions while the matters are in court.
As you’re planning to enable an agent or attorney-in-fact with a tremendous amount of power over your life decisions, it’s important to become more familiar with POAs.
What makes a POA “durable” is the fact that the agent or attorney-in-fact retains this authority even if your mental or physical health eventually leads to incapacitation. In a POA, you can grant the power immediately or your state may also recognize “springing” POAs, which are a form of a durable POA, but only come into effect when you become incapacitated. The POA document should specify the exact definition of incapacitation, so as to avoid any future confusion or battles over when the POA should be activated.
A doctor may have to agree that you meet the preconditions for incapacitation included in the POA. You should discuss these issues with an estate planning attorney and determine how you may want them addressed in your estate planning. It’s worth mentioning, however, that a POA cannot change the content of your Will.
1. Understanding a financial power of attorney
A Financial POA is a type of POA in which someone is authorized to act on your behalf in regard to financial matters.
Creating a financial POA
Some people wait to create a financial POA when it is determined that they may suffer future incapacity or are facing a serious illness. Others plan for the unknown and draft their financial POAs just in case the unthinkable or unexpected occurs later in life.
While by law the agent or attorney-in-fact is in a fiduciary position and is to act in your best interest according to the powers you have granted them, they can make decisions without your consent.
That makes it all the more critical the agent is someone that you trust and who understands your financial wishes. If it appears that your financial agent is not acting in a way consistent with your interests, a court can revoke their authority, but this typically requires that the authority first be challenged.
2. Healthcare power of attorney: The basics
Like the financial POA, a healthcare POA is a legal document. When created, it gives someone legal authority to make medical decisions on your behalf when you are not able to do so. It can give the agent your name power to decide anything, from giving a healthcare provider informed consent to being able to access your medical documents.
It’s important that you engage in communications with the agent or attorney-in-fact to ensure you’re in agreement when it comes to your healthcare decisions.
Within the healthcare POA, you determine the extent of authority that the agent has over your healthcare-related decisions.
Choosing a financial and healthcare power of attorney
Although you can name the same person to serve as the agent for both your financial and healthcare POAs, there may be benefits to naming two different individuals for these important roles.
Not everyone possesses the same qualities that serve well in both financial and healthcare decision-making. You need to consider who is skilled or suited to serve as your agent in each case. When evaluating which individuals you would like to work as the agent for these matters, also think about how well your top picks would work together; at some point, they may end up having to coordinate on decisions, and you want to ensure they can do so effectively.
Protecting yourself against the potential for POA abuse
Any time you give a person the tremendous power that comes with a POA, there is a risk of this person abusing this power. Consider the significance of these decisions and take steps to prevent abuse.
Types of POA abuse
While most people trusted with this authority would never dream of abusing their power, you must consider the possibility of abuse in any of several forms:
- Spending your money on themselves
- Forging a POA to make themselves the agent of your finances
- Acting outside your authorization
- Pressuring for authority that you do not want to give them
You can protect yourself against POA abuse by taking some precautionary steps:
- Don’t feel that you can’t trust people, but do verify their actions.
- Alert your other family members and friends that you have created this POA, charging them with looking out for your best interests by keeping an eye on your agent.
- Choose wisely who you appoint as an agent or attorney-in-fact. You may decide to name one agent for healthcare and someone different for financial. You may decide to name more than one person to act together.
You are ahead of the game if you have already created your Financial and Healthcare POAs. Keep in mind, however, that you may occasionally need to update these documents. You may need to update the documents if you move to another state or the individuals named as your agents are no longer able to perform those duties.
Get help creating financial and healthcare powers of attorney
Financial and Healthcare POAs are important tools that can provide you with peace of mind and you want to make sure they are done correctly and thoughtfully. For assistance with your POAs, contact LegalShield for a personal legal plan. Our network of provider attorneys can help you address every last detail, so you rest assured that your future is covered.
LegalShield provides access to legal services offered by a network of provider law firms to LegalShield Members through member-based participation. Neither LegalShield nor its officers, employees or sales associates directly or indirectly provide legal services, representation or advice. See a plan contract at legalshield.com for specific state of residence for complete terms, coverage, amounts, and conditions. This is not intended to be legal or medical advice. Please contact a medical professional for medical advice or assistance and an attorney for legal advice or assistance.
