When it comes to a power of attorney, you don’t seem to need it – until you suddenly and desperately do it.
Naming a power of attorney is critical to creating a solid financial plan, but you will be surprised to find out that many experts recommend giving power of attorney as soon as people turn 18.
The power of attorney enables a third party, the so-called proxy or proxy, to make financial, legal and sometimes health decisions on behalf of a person. Without a power of attorney, family members may not be able to manage the health decisions and finances of an adult who cannot do this themselves – whether that person is a 19 year old or a 90 year old car accident victim. who needs care at home.
“You need this from the moment you turn 18,” said Jennifer D. Taddeo, estate attorney and partner at Conn Kavanaugh in Boston. “My 18-year-olds are most annoyed when they find out about it because they assume mom and dad can step in and make those decisions, but that’s not the case, kid turns 18.”
[Read: Things You Need for an Estate Plan at Any Age.]
When it comes time to issue a power of attorney, it is important to know the laws of your own state as the rules can vary, although David M. Postic, an estate planning attorney at Postic & Bates in Oklahoma City, says that the states generally operate on the same basic principles.
First, follow these basic guidelines for granting power of attorney:
– How to set up a power of attorney.
– Consider a permanent power of attorney.
– Limited vs. general power of attorney.
– Immediately effective vs. expiring power of attorney.
– Power of attorney for health care.
How to set up a power of attorney
The first step in establishing a power of attorney is to decide who should receive this designation and what responsibilities it entails. The person chosen as your power of attorney should be trustworthy, organized, and calm under pressure, says Taddeo.
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Now that you’ve figured out who your power of attorney might be, it’s time to have the document drawn up. Consumers can use online sites to prepare this document or contact an estate planning attorney. The Power of Attorney Document typically works in conjunction with other estate planning and medical documents, such as a will, a health authority, and a medical information protection permit.
Once the document is created, Taddeo says customers should be careful about who receives a copy of the document and where the document is kept, especially if the power of attorney takes effect immediately.
“I give my clients the rule 1-2-3: One original, and this one original will name two people, actually a principal lawyer and actually a second lawyer. And they’ll keep this one original to name two people in three places: their fire safe, a safe deposit box, or if they don’t have space for it, we’ll keep it for them in our fireproof safe, “she says.” This is one way of doing it. limit the power of this really powerful document. “
[READ: Do-It-Yourself Estate Planning Mistakes.]
The final step in setting up a Power of Attorney is maintaining this document. Some financial institutions will refuse to recognize a power of attorney that they believe is out of date, becoming necessary. The document should also be updated if there is a birth, death, marriage, or major financial event in the family, Taddeo says.
Consider permanent power of attorney
Powers of attorney usually end when the principal is no longer able to make their own decisions – but at that very moment, individuals may want a trusted agent to act on their behalf.
For this reason, a permanent power of attorney can be very useful. Agents named in a permanent power of attorney can make financial or medical decisions in the name of the principal even after the principal’s incapacity for work.
Immediately effective vs. jumper power of attorney
Individuals have the option of granting a power of attorney that will take effect immediately upon signature or that will only take effect under predetermined circumstances, for example in the event of the principal’s incapacity. This option is known as a spring power of attorney.
It may seem appealing, but some estate planning attorneys advise caution to those planning to use the emerging proxy path.
“I usually recommend people to forego the due power of attorney and just have the power of attorney, which is immediate,” says Postic. “If there is a short-term power of attorney, which means it comes into effect at the time the person becomes incapacitated, anyone trying to act on behalf of the headmaster needs some sort of medical examination to come quickly, and when.” someone needs a health care attorney, time is of the essence. “
[Read: Reasons to Discuss Your Estate Plan With Your Children.]
Limited vs. General Power of Attorney
Some people may only wish to authorize a number of limited circumstances. A limited or special power of attorney allows the broker to only conduct certain transactions, such as the sale of a property, without granting him more general privileges.
A general power of attorney gives the proxy far-reaching financial, legal and sometimes health powers. This is the path recommended in most cases by William D. Kirchick, President of the National Association of Estate Planners and Councils and partner in the retail banking division at Nutter in Boston, for saying the restrictions placed on a realtor can sometimes do more harm than good.
“Some states like New York have a checklist of what you (the agent) should or shouldn’t have done,” says Kirchick. “When you give the person authority, I want them to have as much authority as possible because you don’t know what to expect. If you don’t trust the person to do certain things, why? do you even give them power of attorney? “
Power of Attorney for Healthcare
Finally, individuals should consider including a medical authorization in their authorization planning. This person, also known as the health care supervisor, should know your medical needs and should make medical decisions on your behalf.
Close cooperation between authorized representatives and health care proxies can make sense, says Kirchick, since the authorized representatives are often responsible for paying doctor and nursing home bills, but should also be made aware of the individual’s wishes for treatment and living arrangements.
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