When making an estate plan, most people choose to create a Will, which distributes assets after the person dies, and a Living Will, which dictates the medical care you want to receive at the end of your life. However, there is one additional document you should consider, and that's a Power of Attorney (POA). A Power of Attorney is a legal document that grants another person, known as the agent or attorney-in-fact, the authority to act on your behalf in financial, legal, and sometimes healthcare matters. While a POA can be a valuable tool, it's essential to understand both its benefits and potential drawbacks before including it in your estate plan.
Pros of Drafting a Power of Attorney
Having a Power of Attorney can make some things much easier during times when you are unavailable or seriously ill.
1. Continuity
-
Financial Affairs: A Financial Power of Attorney allows someone you trust to manage your financial matters, such as paying bills, managing investments, and handling property transactions, if you become unable to do so yourself. This ensures that your financial affairs continue without interruption. Continuity in the management of your estate, when you are unavailable, is a significant reason to make a POA.
-
Healthcare Decisions: A Healthcare Power of Attorney or Medical Power of Attorney gives someone else the right to make medical decisions on your behalf if you become incapacitated. This ensures that someone you trust can advocate for your healthcare preferences. In most states, someone will not have the power to make decisions for you unless a physician certifies that you are incapacitated. This is an important check on the potential for abuse, especially when the principal is elderly.
2. Avoiding Court Intervention
-
Without a POA, if you become incapacitated and cannot manage your affairs, a court-supervised guardianship or conservatorship may be necessary. If your loved ones have to get a conservatorship or guardianship, that means they will need to go through the court system. In addition to being costly and time-consuming, it could result in someone managing your affairs whom you may not have chosen. With a POA, you decide who gets to manage your affairs, not the court.
3. Customizable Decision-Making
-
It can be disconcerting to give someone else the right to act on your behalf, but POAs are fully customizable to meet your needs. You don't need to give someone authority to make all of your decisions. For example, you can limit the agent's authority to handle only certain financial matters while you are out of the country. Or, you can limit the POA to making healthcare decisions if you are in a coma. This flexibility allows you to tailor the document to your unique needs and preferences.
4. Avoiding Family Disputes
-
Having a clearly designated agent through a POA can help prevent family conflicts or disputes over who should make decisions on your behalf. This can provide peace of mind for you and your loved ones.
5. Estate Planning Coordination
-
A well-drafted POA can work in conjunction with other estate planning documents, such as a Living Will or Trust, to provide a comprehensive plan for your financial and healthcare decisions. If you have been diagnosed with a serious or terminal illness or are being transferred to a long-term care facility, then a POA can make coordinating your care much easier.
Cons of Drafting a Power of Attorney
1. Risk of Abuse
-
Granting someone broad powers through a POA can be risky if the agent is untrustworthy or does not act in your best interests. There is a potential for financial or legal abuse, which is why choosing a reliable and responsible agent is crucial. The risk of abuse can be mitigated in the medical context since most states require a physician to certify whether you are incapacitated.
2. Loss of Control
-
When you create a POA, you are giving someone else the authority to make decisions on your behalf. This means you may lose some control over your financial and healthcare matters. While this is often necessary for practical reasons, it can be a disadvantage if you prefer to maintain full control. If you are relatively young and healthy, there might not be an immediate need for a POA.
3. Potential for Mismanagement
-
Poor Choice of Agent: Your chosen agent may not always make the same decisions you would in specific situations. This can lead to conflicts if your agent's choices differ from what you would have done. It's important to communicate your wishes clearly to your agent and to communicate them in writing. You should also be certain that the agent is trustworthy.
-
Family Disputes: It can be difficult for adult children to handle financial and medical affairs during a stressful time. If one child is chosen as the agent over another child, this might lead to hurt feelings and even disputes. Even if you are basing your decision on the abilities of each child, the children may wind up arguing over your wishes.
4. Legal Requirements
-
POAs must comply with state-specific legal requirements. An improperly executed POA may not be legally valid, leading to potential problems down the road. When you use a service like FastWill, you can be certain that your state POA meets all the requirements of your jurisdiction.
5. Expiration and Revocation
-
Depending on the type of POA you create, it may expire upon a specific event (such as on a specified date) or be revocable by you at any time. Managing these aspects can require ongoing attention and legal updates to ensure the document remains effective.
Do You Need a POA?
So, do you need a Power of Attorney as part of your estate plan? It can be helpful in specific circumstances. A well-drafted POA can provide essential protection and continuity if you become incapacitated. This will help your family avoid court intervention and family disputes. However, it's essential to balance the benefits with the potential drawbacks, such as the risk of abuse or loss of control. To create a POA that aligns with your goals and circumstances, consider using FastWill to guide you through the full process.
