The term estate planning encompasses a range of legal documents and strategies aimed at protecting your assets and ensuring your wishes are carried out after your passing. While many people are familiar with wills and trusts, one essential component that is often overlooked is the power of attorney. Unlike a will, which describes what will happen with your estate after you are gone, powers of attorney operate while you are alive.
Powers of attorney allow someone else to make decisions on your behalf. There are two main types of powers of attorney, a financial power of attorney and a healthcare power of attorney. Without these documents in place, if decisions need to be made on your behalf, your family may have to consider creating a guardianship for you. To properly manage your affairs, it's important that you choose the right person to make decisions for you.
Once you've created a power of attorney, it's important to keep your document in a safe, but available, location in case it is needed. Another thing to keep in mind is that you'll want to review your power of attorney every few years to make sure you've got the right people in the document and that you are only granting the powers to them that you are comfortable with. When things change, you have the right to change your powers of attorney as well.
So let's look at the importance of powers of attorney in estate planning and why they should not be underestimated.
Understanding Powers of Attorney
To begin, let's define what a power of attorney is. A power of attorney is a legal document that grants someone, known as the "Attorney-in-Fact" or "Agent," the authority to act on your behalf in financial, legal, and healthcare matters. It allows them to make decisions and take actions according to your wishes when you are unable to do so yourself.
Financial Power of Attorney
One crucial aspect of estate planning is ensuring that your financial affairs are managed if you become incapacitated. A financial power of attorney grants someone the power to handle your financial matters, such as paying bills, managing investments, and filing taxes. Without a financial power of attorney in place, your loved ones may face significant challenges in accessing and managing your assets.
Healthcare Power of Attorney
In addition to managing your financial affairs, it is equally important to have a healthcare power of attorney. This legal document designates someone to make healthcare decisions on your behalf if you are unable to do so. This includes decisions about medical treatments, surgeries, and end-of-life care. Having a healthcare power of attorney ensures that your wishes regarding medical interventions are respected and followed.
Avoiding Guardianship Proceedings
Without powers of attorney in place, your loved ones may need to go through the costly and time-consuming process of seeking guardianship or conservatorship. This legal process involves petitioning the court to appoint someone as your guardian or conservator to make decisions on your behalf. By having powers of attorney in place, you can avoid this process and have a trusted individual already designated to act on your behalf.
Choosing the Right Agent
Selecting the right person to act as your attorney-in-fact is crucial. This individual should be someone you trust implicitly, as they will be making important decisions on your behalf. It is essential to have open and honest conversations with your chosen agent to ensure they understand your wishes and are willing to carry them out. Additionally, it is wise to name alternate agents in case your primary agent is unable or unwilling to act when the time comes.
Updating Your Powers of Attorney
As with any estate planning document, it is important to review and update your powers of attorney periodically. Life circumstances and relationships may change, and it is crucial to ensure that your designated agents are still the right choice. Regularly reviewing and updating your powers of attorney will help ensure that they accurately reflect your wishes and that your chosen agents are still capable of fulfilling their roles.
Working with an Estate Planning Attorney
Creating powers of attorney is a complex legal process that requires careful consideration. Working with an experienced estate planning attorney is highly recommended to ensure that your powers of attorney are legally binding and aligned with your overall estate plan. An attorney can provide guidance, help you understand your options, and draft the necessary documents to protect your interests.
While many people focus on wills and trusts in their estate planning, powers of attorney should not be overlooked. These legal documents are essential for ensuring that your financial and healthcare matters are managed according to your wishes if you become incapacitated. By taking the time to create powers of attorney and selecting the right agents, you can provide peace of mind for yourself and your loved ones. Remember to review and update your powers of attorney regularly to ensure they remain relevant and accurate. Working with an estate planning attorney is crucial to ensure that your powers of attorney are executed properly and in compliance with applicable laws.
Do You Need an Estate Plan?
If you need an estate plan or just some updates to the plan you've already created, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you to work with an estate planning attorney to get your plan prepared and implemented.