Power of attorney is an excellent tool for estate planners. However, many people are unaware of how versatile the tool is for individuals and estates.
Before creating a power of attorney, it’s important to understand its purpose and how to use it in a way that is effective for you, your interests and those of your family.
What is power of attorney?
Essentially, a power of attorney (POA) document names someone to control certain aspects of your estate in the event that you are unable to do so yourself. There are generally two types of POAs: medical and financial.
Medical POA, or healthcare POA, focuses on the ability to make medical decisions on your behalf if you are incapacitated. Depending on the scope of the POA, which you can determine, medical decisions may involve:
- The care you receive, such as surgery, psychiatric treatment and home health care
- The doctor or facility from which you would receive care
- The type of long-term care you receive, such as a nursing home or assisted living facility
- Other details like what you eat and who bathes you
Along with a medical POA, you can also create a financial POA. This POA could be assigned to a different person or the same person you assigned to the medical POA. However, the financial POA controls the financial aspects of your estate, so you would want to choose someone who is savvy in such matters. Issues that can be addressed in a financial POA include:
- Access to your accounts for medical care, housing needs and other bills
- Filing taxes for you
- Collecting funds to pay any debts you may have
- Applying for benefits on your behalf
- Managing your property
You can create a Durable General Power of Attorney document, which can address the management of your assets during your life and in the event that you become unable to manage your affairs as a result of infirmity or age. Power of attorney can be as limited or as general as you desire.
Also, you can revoke power of attorney at any time unless you are found to be incompetent by a judge. You can also appoint temporary or permanent guardians under your power of attorney for any minor children during your unavailability or incapacity.