If you listen to estate planning experts, you’ll often hear them talk about all those recommended planning tools that everyone should have: A Last Will and Testament, a living will, some type of advance directive for health care, and maybe a trust. And one other thing, of course: the durable power of attorney – which is almost always mentioned in reference to your financial decision-making (though it can also be used for health care in Michigan). Most people readily recognize why the Last Will and the various medical documents are necessary, and some even understand that trusts can be beneficial for many families. When it comes to that power of attorney, though, a lot of people hesitate and wonder why a durable power of attorney might be important for their estate planning needs.
An Understandable Reluctance
It’s only natural that people are taken aback when they hear someone recommend that they sign a document giving another person power of attorney over their decision-making. After all, most of us have heard horror stories about people who have signed these types of documents and then lived to regret the decision as their chosen attorney-in-fact proceeded to take advantage of that trust. Few people are comfortable entrusting another person with that sort of control over their finances.
Still, many millions of Americans do execute the power of attorney, and most never experience fraud or abuse. There’s a reason for that, of course, and it has to do with the types of powers that you provide to your attorney-in-fact. While you can give that person powers that are so broad that they can act in your stead for almost any decision-making purpose, you can also limit those powers to just a few very specific duties. As a result, there is no real need to fear the possibility of a rogue attorney-in-fact, provided that your POA properly limits his or her authority to act on your behalf.
What is a Durable Power of Attorney?
A Power of Attorney is simply a document that empowers another individual to act on your behalf for certain specified financial or medical activities. These can be broad and virtually all-encompassing, or tightly restricted. Basically, you give someone else the power to conduct aspects of your financial affairs with all of the authority you would exercise if you were doing those things on your own. As such, it is a powerful tool that must be properly managed to ensure that it accomplishes your goals while protecting your interests.
Power of attorney can come in two main forms: the standard power of attorney and the durable power of attorney. The first is active when created and ends with the death or incapacitation of the grantor. The durable variety, however, remain active even through incapacitation and end only when the grantor dies. Of the two main types of power of attorney, the durable is the one that provides the most benefits for the incapacity planning part of any sound estate plan.
Why is the Durable Power of Attorney Important?
The fact is that none of us are invulnerable to harm, illness, or any of the other countless things in life that could leave us in a state where we cannot manage our own affairs. Millions of accidents occur each year, and many result in serious injury. Traumatic brain injuries and other serious damage can leave patients in comas or otherwise unable to function. Illnesses are a part of life too, and sometimes sickness and disease can be so bad that patients are left incapacitated. And then there are the natural causes: strokes, dementia, and other unexpected ailments that render us unable to make our own decisions.
The problem is that those periods of incapacity must be dealt with, since your financial and medical decisions will still need to be made. Doctors need instructions to know which treatments you want, and when you’re willing to receive that care. Your family needs someone to take charge of financial concerns to ensure that bills continue to be paid, paychecks continue to be managed, taxes get paid, and so on. If there is no one appointed to step into your place during incapacity, the matter will end up being settled in a courtroom.
That means that a judge would ultimately select the person who serves as your conservator. And while that person could end up being the exact same individual you would have chosen for yourself, that’s probably not a gamble that you want to take. Besides, a conservatorship costs money due to court fees, legal expenses, and the remuneration provided to the appointed conservator – and all of those expenses end up being paid by your estate. Obviously, a lengthy period of conservatorship could significantly reduce the size of your nest egg.
Why Does This Matter for Estate Planning?
Your estate planning is about more than just determining who gets your assets when you pass away. It’s also about protecting those assets in life, and securing a legacy for your loved ones. When incapacity strikes and you suddenly lose the ability to make your own decisions, your entire estate plan can be disrupted if your estate is suddenly left with a host of unexpected expenses related to a conservatorship. You can ensure that your plan remains on track by appointing the right attorney-in-fact to handle your affairs when you can no longer do so on your own.
At Biddinger & Estelle, PC, we know how easy it can be for many individuals to simply assume that they’ll never need anything like a durable power of attorney. At the same time, we’ve also witnessed the hardship and expense that can result from a failure to have these important safeguards in place. We can work with you to ensure that your estate plan and your best interests are protected with this critical document. If you want to do everything you can to make sure that your rights are protected and provide important protections for your loved ones, then contact us at our website or call us today at (989) 872-5601.