Demystifying Powers of Attorney in Estate Planning

Estate planning and powers of attorney are often misunderstood. Many people believe that estate planning is only for the wealthy or something to be postponed until near retirement. However, every individual should, at the very least, have powers of attorney in place. In this article, we will discuss the types of powers of attorney and their significance.

Two Main Types of Powers of Attorney

Powers of attorney can be divided into two primary categories:

1. Durable power of attorney (also known as a general durable power of attorney or financial power of attorney)

2. Health care power of attorney

Durable Power of Attorney

A durable power of attorney allows the person you designate as your agent to conduct business on your behalf, essentially stepping into your shoes. It doesn't have to be the same person responsible for making your medical decisions. This document should be comprehensive and cover various situations that may arise.

Referred to as a "kitchen sink document," a durable power of attorney should have clauses for any situation that could occur if you become incapacitated. This document can be modified to grant or restrict powers given to your agent. It is beneficial for married couples who may not own everything jointly or for adult children assisting their parents in managing their affairs later in life.

Health Care Power of Attorney

A health care power of attorney is a more standardized document. While an experienced estate planning attorney can guide you through it, there is typically less customization involved. This legal document grants the person you designate the authority to make health care and medical decisions on your behalf if you are unable to do so.

For example, when a young adult leaves for college, their parents may obtain a health care power of attorney, allowing them to make decisions if an unexpected event occurs. The designated person should be trustworthy and capable of remaining calm in crisis situations. Having a health care power of attorney in place can prevent arguments among family members and provides medical professionals with a single point of contact.

Consulting an Estate Planning Attorney for Powers of Attorney

When setting up powers of attorney, there is a lot to consider. A knowledgeable estate planning attorney can walk you through each document and explain them in detail. If you or your loved ones have not yet established powers of attorney, it is essential to consult with an estate planning attorney to ensure your interests are protected.