Importance of Power of Attorney
Most people recognize the importance of comprehensive estate planning, although they may choose to avoid it for as long as possible. One important part of your estate plan is your power of attorney (POA). Basically, a POA is a document that empowers an individual to make legal decisions for you in the event that you become incapacitated or are unable to do so for yourself. You can choose the extent of the authority you grant in the “agent” by working together with an experienced estate planning attorney to determine how to best represent your goals.
The risks of not having a power of attorney:
What happens if you have an accident or an illness that renders you unable to handle your legal, financial, and medical affairs? Many people incorrectly believe their spouse is legally able to handle their affairs. While a spouse will be able to handle some matters pertaining to community property and is in the line of priority for medical decisions, they will not be able to make decisions regarding your separate property or handle certain community property matters that require both spouses such as selling real estate. Similarly, a parent has no legal authority to handle the affairs of an adult child. What happens if the parents die while the child is still a minor? Someone needs to make decisions until a tutor is appointed. The scenarios are endless in which a well-crafted POA is needed or useful.
Without a power of attorney, your financial affairs will be in limbo until a curator is appointed in an interdiction proceeding. These proceedings can be expensive and time-consuming. The judge has no obligation to name the spouse, parent, or adult child as the curator and may appoint anyone they deem fit. For example, the judge may feel that the close relative has a conflict in that they are the beneficiary of the incapacitated person’s assets, or the judge may decide that someone else has more knowledge and experience in handling certain matters, such as business decisions.
Examples of people who benefit from a power of attorney:
Many people wait until they are in the early stages of a life-threatening illness or dementia. It’s important to see an estate planning attorney as soon as possible in this situation. If you wait too long, you can lose capacity to grant the POA. Timely executing a POA ensures your important decisions about money, assets, and health care are left to someone you trust rather than who the judge decides.
Some people use financial brokers to assist them with financial planning, investments, securing insurance policies, and more. The person can sign a limited power of attorney giving their broker permission to handle these certain financial transactions.
Military men and women often execute a POA prior to a deployment. They do so to allow their trusted relative or friend to make legal and financial decisions on their behalf while they are overseas.
The benefits of a POA can also be used for matters of convenience. For example, you can give POA to an employee to handle a business deal that would otherwise require the owner’s signature. An executive assistant might be given POA to handle a personal real estate closing or other personal financial or legal matters. An elderly relative may simply need help running certain financial errands that they otherwise still have the capacity to do themselves. In situations like these, the scope of the POA would be narrowly tailored and limited in duration.
Just about everyone should have a power of attorney, whether for a specific immediate need or just to be prepared in the event of an incapacitation.