Power of attorney (POA) documents are part of a basic estate plan everyone should have. Let’s review what they are, how they work, and when they come into play. Covenant Trust isn’t a law firm, and the ideas here are not legal advice. POA documents are governed by state law, and individuals should consult a reputable estate planning or elder law attorney for advice on how best to use POAs.
Types of POAs
POAs are legal documents that allow you to assign decision-making authority to others to act on your behalf. This authority can be effective currently or only when you have been determined to be incapacitated. We will cover two basic types of POAs that are typically part of most estate plans.
The General POA grants broad authority to another person to handle a wide range of legal issues for you. A General POA loses its power if you become incapacitated. If the intent is for that authority to continue through incapacity, it needs to be a durable POA, meaning the authority granted will continue through incapacity. These will often be called a Durable General POA. The authority granted typically includes various financial and real estate-related issues but can also be tailored to handle specific matters.
A Medical or Healthcare POA only comes into effect when you cannot make health-related decisions on your own. The authority granted is often effective upon execution of the document, so should something happen, your POA can act immediately on your behalf.
Medical POAs usually only name the person you want to make health-related decisions for you. They typically don’t provide specifics regarding your wishes concerning your care. It is common for a Health Care Directive or Living Will to accompany a Medical POA. These documents provide specific instructions on the type and extent of care you wish to receive. But Health Care Directives and Living Wills do NOT grant authority to an agent to act on your behalf. It is the Power of Attorney that is the instrument that grants the authority to act on your behalf.
When are POAs effective?
POA documents are only effective when you are alive. The authority granted to someone by POA ends at your death. This is obvious when it comes to Health Care POAs, but it may be confusing when it comes to Durable POAs. Even though authority is granted through incapacity, the powers under a Durable General POA also end at your death. Your Will only comes into effect at your passing, and then the Executor named in your Will steps in to handle the assets in your estate. It is often true that the same person is named as executor in a will and agent in a Durable POA.
Who should you name as your POAs?
For many, the people named in your POA documents is an easy decision. Choosing someone you trust fully and can make decisions in your best interest is essential. Especially for health care decisions, naming someone nearby who can be available quickly should also be considered. These are usually relatives or close friends. It’s also a good idea to name several successors should the primary POA you’ve named be unavailable. For those who don’t have someone to name as their POAs, an attorney or professional fiduciary might be an option.
Where should you keep them?
Your POA documents should be kept in a known and easily accessible location. While keeping them in a safe deposit box at a bank may seem like a good idea, doing so may also defeat the purpose of having them in the first place. If you are the only signer on the safe deposit box, then those needing access to your documents will not be able to get them. Ensure that those named in your POA documents have copies of the documents themselves.
Summary
Each state has its requirements for what must be included in POA documents. If you have moved since drafting your POAs, updating your documents to include the state-specific language for your new location is a good idea. Having both a Durable General POA and a Health Care POA in place are an essential part of your estate plan. While you might not expect to need these documents, knowing they are in place can provide peace of mind that your wishes will be followed should the need arise.