A comprehensive guide to understanding the roles and differences between durable powers of attorney for healthcare and finance.
As we age or face serious medical conditions, it becomes crucial to have a plan in place for making important decisions about our healthcare and finances. This is where powers of attorney come into play. A power of attorney (POA) is a legal document that grants someone else the authority to act on your behalf for specific matters.
Durable powers of attorney are designed to remain effective even if you become mentally incapacitated and unable to make decisions for yourself. This ensures your wishes are carried out by someone you trust during a time when you may be most vulnerable.
There are two main types of durable POAs - one for healthcare decisions and another for financial and legal matters. Let's explore the key differences between these important documents.
A durable power of attorney for healthcare allows you to name an agent, also called a healthcare proxy, to make medical decisions on your behalf if you cannot make them yourself. This person would have the authority to:
The healthcare agent's role is to advocate for the medical care you would want based on your values, preferences, and previously stated desires. It's critical to choose someone you fully trust to make these very personal decisions for you.
While a healthcare POA covers medical decisions, a separate durable power of attorney is needed for legal and financial affairs. With this document, you can appoint an agent to handle matters such as:
Your financial agent will have a fiduciary duty to act in your best interests at all times. They must keep detailed records and manage your assets prudently based on your stated wishes.
A key feature of durable POAs is that they remain valid even if the person who granted them (the "principal") becomes incapacitated or unable to make their own decisions due to an injury, illness or aging issue like dementia.
However, durable POAs do not automatically take effect as soon as they are created. The powers only become effective if and when the principal is determined to be incapacitated by a physician or court.
Until that point, the principal retains full decision-making authority over their healthcare and finances. The POA agents simply have legal standby authority to act if needed.
You can also create a "springing" durable POA that only takes effect upon a specific event or condition, rather than general incapacitation. Make sure the triggering conditions are clearly outlined.
For a durable POA to be legally valid, it must meet certain requirements which vary somewhat by state. In general, you must:
Many states have statutory POA forms available to ensure your document meets all the necessary legal requirements. You can find your state's official forms online or have an estate attorney prepare the POAs for you.
It's wise to create separate durable POAs for healthcare and finances, rather than a single general POA document. This allows you to name different agents best suited for each role.
Appointing the right agents for your durable POAs is one of the most important decisions you'll make. Your healthcare and financial agents should be trustworthy individuals who understand your values and wishes.
For healthcare, many people choose a close family member or spouse who can advocate for the types of treatments and care they would want. Avoid naming anyone whose personal beliefs may conflict with your own preferences.
For finances, you may want an ethical person skilled at handling money, or a corporate trustee like a bank's trust department. Agents should ideally live nearby and be very organized.
Discuss the responsibilities thoroughly with potential agents, and name backup options as well. Be sure your loved ones know who you've designated for these critical roles.
When acting under a durable POA, agents have important duties they must uphold. Healthcare agents must follow any written instructions you've provided about your preferred medical treatments. If none exist, they must act in your best interests based on your known values and wishes.
Financial agents have a fiduciary duty to manage your money and property responsibly for your benefit. They cannot commingle your funds with their own, and must keep detailed financial records.
Agents cannot override any legal limitations you place on their authority in the POA document itself. For example, you can restrict their ability to change beneficiaries or make gifts exceeding a certain amount.
In general, courts and others err on the side of preserving the principal's rights over an agent's authority in cases of dispute or potential abuse. POAs are revocable and can be terminated if needed.
You can revoke or change your durable POAs at any time as long as you are still mentally competent to do so. The easiest way is to use a durable POA revocation form or create a new POA document naming different agents.
It's very important to notify all previously appointed agents that their authority has been terminated. You should follow your state's requirements for properly recording the revocation as well.
Some reasons you may need to revoke or update a durable POA include:
Don't wait until incapacity or an emergency to make these critical updates. Review your POAs periodically and keep them aligned with your current wishes.
Having durable powers of attorney in place is an essential part of preparing for the future. By naming trusted agents to make healthcare and financial decisions for you, you can maintain control over your wishes even when faced with incapacity.
Remember, establishing valid durable POAs requires following your state's laws precisely. Take the time to understand the different roles, and carefully choose agents you have full confidence in.
Don't wait until it's too late - speak with your loved ones and establish these critical legal documents while you are still able. Taking these proactive steps now can provide tremendous peace of mind for your future.
Should you need guidance, consider consulting with an estate planning attorney who can ensure these important documents are properly created and executed according to your state's requirements. By having a comprehensive plan in place, you can live life with fewer worries.