Did you know that a power of attorney is a legal document, in which the principal or grantor gives a person the power to act for him or her? This person is referred to as the agent. Generally the agent, on behalf of the principal, has the authority to sign legal documents, conduct banking, manage property, and take action in other financial affairs. A principal may, with good intention, look on the internet and create a basic power of attorney. In the new year, you may want to consider adding a power of attorney to your estate plan. Unfortunately, basic powers of attorney do not work and we will discuss more on why this is the case.
First of all, basic powers of attorney are not durable. This means, under a basic power of attorney, the agent is only authorized to act, so long as the principal is mentally competent. Once the principal dies or becomes incapacitated, the power of attorney is no longer valid. For example, if the principal suffers a stroke and requires someone to manage his or her financial affairs, the agent no longer has the authority to do this. In this instance, a court will likely designate who will act on the principal’s behalf. A durable power of attorney is another type of document, which specifically provides authority for the agent to continue to act upon the principal’s incapacitation. Similarly, a springing power of attorney allows a designated agent to begin acting on the principal’s behalf only upon his or her incapacitation.
Furthermore, basic powers of attorney do not allow the agent to make healthcare decisions. Another potential pitfall with a basic power of attorney is that the agent will likely be unable to make any medical decisions for the principal absent a specific durable power of attorney for healthcare.
Additionally, they do not allow the agent to apply for government benefits. In the face of the unexpected incapacitation of the principal, not only will a basic power of attorney expire and not allow the agent to make healthcare decisions, it will also be insufficient for the agent to apply for government benefits on behalf of the principal. This can often be an unconsidered issue, but should a principal require long-term care, such as a nursing home, his or her assets may be drained quickly, which is why it can be vital for the agent to have the authority to apply for Medicaid or Veteran’s benefits.
As part of your year in review, now can be a great time to reflect on important legal tools you may wish to have in place to protect yourself or a loved one. Much can change over the course of the year and your wishes may also change in the post COVID-19. If the different types of powers of attorney and the possible drawbacks feel a bit dismaying, an estate planning attorney can assist you with selecting the proper documents to meet your goals and protect your family and finances. Please reach out to our office for more information.