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Why Estate Planning Is So Important
When it comes to estate planning, it is important to include provisions for what is to occur with a person’s affairs both while they are still alive as well as after their death. It is essential to plan ahead for both medical and financial decisions by creating the necessary legal documents in advance. A proper set of estate planning documents that direct the wishes of a person during incapacitation as well as after death are vital to ensuring that the person’s wishes are carried out exactly as they want and not left to the uncertainty of allowing the courts to settle the matter.
A very effective way to ensure a seamless transition in a person’s affairs after their incapacitation or death is to have estate planning documents in place, such as a durable power of attorney (POA) and will, and to focus on creating these documents proactively. Assigning a durable power of attorney requires completing a POA form. A family member or close friend is often chosen for this important responsibility.
A Durable Power of Attorney and a Will
A power of attorney and a will are separate documents that provide different protections to a person’s estate. In addition to a will and POA, other estate planning documents such as a living will or healthcare directive may be needed to fully address an individual's needs. A durable power of attorney is used to direct a person’s affairs while they are still alive. The POA can become effective immediately if the person needs help dealing with their day-to-day affairs, may be set for a specific effective date, or can be set to become effective only after a person is incapacitated and cannot make decisions for themselves. For example, a POA can be used to allow an agent to manage finances while the principal is abroad. While a power of attorney allows a person to appoint an agent to administer to their needs while they are still alive, the durable power of attorney ceases when the principal dies. This is when a will is needed.
A power of attorney authorizes an agent to act with legal authority on behalf of a principal. This authorizes the agent to handle specific matters, such as financial decisions or healthcare decisions, depending on the type of POA. The persons involved in a POA are the principal, who grants the authority, and the agent, who is acting on behalf of the principal. Agents can include an adult child, family member, or close friend, and it is important to choose someone trustworthy, as they will be acting in your best interests.
There are different types of durable powers of attorney. General powers of attorney grant broad authority to handle legal, medical, or financial affairs, while limited POAs restrict the agent to specific tasks and certain actions. An ordinary power of attorney is valid only while the principal is of sound mind and becomes invalid if the principal becomes incapacitated. For a power of attorney to be durable, thereby enduring the principal's incapacity, it must be explicitly designated as durable within the language of the document. It is important to note that for a POA to be valid, the principal must be of sound mind and mental capacity at the time of signing, and the document must comply with the law in your state. Consulting a lawyer may be necessary for complex situations to ensure all legal requirements are met and the documents are properly executed.
Types of Durable Power of Attorney
A durable power of attorney, or durable POA, is a legal document that allows a trusted person, known as the agent, to act on behalf of the person granting the authority, called the principal. There are several types of durable powers of attorney, each designed to address specific aspects of a person’s affairs.
The most common type is the durable POA for finances. This document gives the agent the authority to manage the principal’s financial affairs, such as interacting with financial institutions, handling bank accounts, paying bills, managing investments, dealing with tax matters, filing tax returns, overseeing real estate transactions, and dealing with insurance policies or government benefits. With this financial power, the agent can ensure that the principal’s day-to-day affairs and long-term financial interests are protected, even if the principal becomes mentally incapacitated.
Another important type is the durable power of attorney for healthcare, sometimes called a medical power of attorney. This legal document authorizes the agent to make medical decisions and communicate with health care providers on behalf of the principal if they are unable to do so themselves. The agent may be responsible for making choices about medical treatment, accessing medical records, and ensuring that the principal’s wishes regarding medical care are respected. Without a POA in place, some medical treatments may be left to the discretion of the principal's medical providers if the principal is incapacitated.
Some people choose to keep financial and healthcare powers of attorney separate, while others may combine them, depending on their specific situation and state laws. By selecting the appropriate type of durable power of attorney, individuals can ensure that their financial affairs and medical treatment are managed according to their wishes, providing peace of mind for themselves and their loved ones.
What Is a Will?
A last will and testament is a legal document that controls what happens to a person’s property and assets after their death. Wills allow a person to grant their assets or property to certain beneficiaries and determine what and how much of the estate they each will receive. Assets covered by a will can include real estate, personal property, bank accounts, investment accounts, pension plans, and other financial information such as loans and tax documents. Once a will is in place, the executor of the will, who is appointed by the individual, is in charge of dividing up the assets of the estate according to the wishes of the principal.
If a person dies without a will, it is left up to the courts to administer the individual’s assets according to state laws. This process is based upon pre-established formulas that give general guidance to the courts on how to divide a person’s estate. Oftentimes, an executor is appointed by the court and has no knowledge of the wishes of the individual, and they must act according to arbitrary rules set forth by the court. This can lead to an estate being divided up in a manner that is not consistent with the wishes of the deceased or their family.
Proper estate planning ensures that a person’s life work can be shared with their loved ones in a manner that they see fit. The vital tools required to complete proper estate planning are the formulation of a durable power of attorney for the critical time when an individual can no longer act for their own best interest, a last will, and other estate planning documents to ensure their estate is handed down according to their wishes after death. Organizing and securely storing all estate planning documents is essential to make sure a person’s needs and final wishes are not left to chance.
How to Create a Durable Power of Attorney and a Will
We can help! Use our custom durable power of attorney form and last will and testament form to create the legal documents that you need today.
