“With great power comes great responsibility.” – Voltaire, 18th century French philosopher
A family member or close friend giving you the responsibility to be his or her Power of Attorney (POA) isn’t a duty to be taken lightly. Now before you turn into Gary Cooper and think, aw shucks, this is no big deal, think again. This is a big deal. It is a great power and a great responsibility. Whoever gave that clout to you has the fullest confidence in knowing you would do what’s in that person’s best interests if – or when – the time arises, with the realization that there might be tough decisions to be made. Now that you have an official legal document granting you extraordinary power, the question you and countless other people frequently ask themselves: okay, I’m a Power of Attorney, now what?
If we lived in a perfect world, there would be no need for POAs. But that’s not the case. A considerable amount of time may pass before you need to use the POA. It might sit in a desk drawer or the safety deposit box at the bank for years. But look at it this way, using sports analogies: you may be the backup pitcher or quarterback and not be called up to play for some time, but at least you’re dressed, warmed up and ready to step in and play, if needed. The POA gives peace of mind to all parties involved. By taking the time now and spending a couple of hundred of dollars and having a POA drawn up, you can save your family a lot of headaches and heartaches in the future.
Drawn up by an attorney, the POA document directs powers for one person to act on another person’s (the designator) behalf when the designator can’t handle his or her own affairs. In layman’s terms, a POA gives your representative access to conduct your affairs if you are unable to. The POA designee could be one spouse to another spouse, or a parent to a child, particularly if the parents are older and health is declining. In cases where the family is extremely close, it’s not unusual for two siblings to share POA for the parents. A close family friend can be designated POA. Designating a friend as POA happens more often than you think, especially if there are no children, nieces and nephews, etc… involved.
The primary POA types are financial and medical or health care. It’s recommended to have both to cover all important decisions so if something does happen your POA designee can have access to your medical files, and checking and savings accounts. Without the POA, your banking business will be frozen until the courts appoint a representative called a conservator, who then dictates your business. And, in the worst case scenario, your family may have to go to court to get guardianship to manage your estate, and guardianship is not a fun thing.
The POA’s duties end with the death of the person who created the document. At that point, the POA has no further rights, duties or responsibilities, and the job now falls to the executor of the deceased’s will. There is a will, right? Matters get more complicated if there is no will or trust. In that case, the deceased’s estate goes to probate court and getting that solved could take up to two years, everything about your estate will be made public, and it will cost thousands of dollars in legal fees. The only people who benefit from not having a will are lawyers.
By granting someone POA over you doesn’t mean you don’t have any or lose rights. You keep the authority to do whatever you want to do with your personal finances. And that’s not going to change unless you become incapacitated. There are instances where the POA can work to your advantage. Let’s say you’re looking to buy a new home, a piece of rental property, or a classic car, but unfortunately you or your wife aren’t able to be there for the final sale. Your POA could be used to have someone be your representative and finish the transaction.
You might ask yourself, why do I need a POA? I’m in relative good health today. That’s great, but what about tomorrow, or next month, or next year? Think of it as another tool in your preplanning tool kit, right alongside your will, trust, funeral arrangements, etc… As everyone knows, life can change in an instance. You could trip on the rug and bump your head tonight, or be in a car accident next week. What if you’re incapacitated and unable to handle your own affairs? That’s when the POA goes into effect.
Now, if you already have a POA, good for you. But like car and appliance warranties, it’s important to dust off those documents from the file cabinet or safety deposit boxes and review them to see if the paperwork is valid. Laws change frequently, and the POA you had drawn up 10 years ago may not be as strong as you think, and may need to be rewritten. You also might want to declare a new POA, or divide the responsibilities up between two children, not one. Now is the time to do that.