The day will come when your loved ones won’t be able to make their own decisions.
That’s when you, another family member, or trusted family friend, will have to step in to manage their finances or decide what kind of medical treatment they should have.
When that day arrives (and it will eventually, sooner rather than later), one estate planning tool you’ll need to utilize is a Power of Attorney (POA). As important as this document is, unfortunately, about half of Americans do not have a POA.
A POA is the most important legal document a person can have, or needs, but, according to a Forbes article, only 18 percent of people 55 and older have a POA, a will and a health care directive.
What is a POA? It is a legal document that gives a family member or close friend the ability to step in and make health and financial decisions when a parent or senior either can’t do so themselves or would rather not do.
So why do I need a POA? Common reasons why include:
- Financial difficulties. A POA allows you to pay the bills and manage the finances for parents who are having difficulty staying on top of their financial obligations.
- Chronic illness. Parents with a chronic illness can arrange a POA that allows you to manage their affairs when they focus on their health.
- Memory impairment. Children can manage the affairs of parents who are diagnosed with Alzheimer’s or a similar type of dementia.
- Upcoming surgery. With a medical POA, you can make medical decisions for the principal while they are under anesthesia or recovering from surgery.
It begins with a conversation. The POA talk may not be an easy conversation with your parents. Your parents have most likely thought about a POA and other matters related to end-of-life planning, and he or she might have taken some steps to put those plans into action without your knowledge.
Be prepared to listen to what your parent’s thoughts are and what steps he or she has already taken. Make sure you hear them out before voicing any opinions of your own. It’s okay to ask questions, but arguing or debating plans you might not agree with probably won’t be helpful early on in the process.
Don’t expect to get everything wrapped up in one or two conversations. It may take several talks to get to the end result. Rather, open a dialogue and work toward the next steps.
After having the conversation, creating a POA is a simple process and can save your family a lot of time and trouble down the line.
To cover the important issues, your senior will probably need two separate POAs, one for health care and another for financial matters. The reason for keeping these two documents separate is to simplify things for people who need to use the POAs. Besides, your senior’s health care POA will probably be full of personal details that they wouldn’t want the people at the bank to know. And their doctor doesn’t need to know all about their finances.
Who serves as POA? The final decision is up to your parents. They choose someone to make decisions on their behalf. Depending on the circumstances, it could be the oldest child, or the child that lives closest. A close friend may be named POA if there are no children.
If you have multiple siblings, then your parents will need to choose one to name. In many cases, it’s a good idea to also list a secondary representative. That person can step in if the primary agent becomes incapacitated or otherwise unable to act on your parents’ behalves.
A lot of seniors may feel uncomfortable with the idea of granting a POA if they feel like it means giving too much power over to someone else. It’s true that a POA can grant the agent they choose a lot of power, but it’s a common misconception that granting POA gives someone total control over their health and money.
The most asked question is: When should a senior set up a POA? The best answer is, before they need it. Anybody over age 18 should have a POA, but if you’re in your mid-50s or older and don’t have one, don’t fret. The sooner you sit down with an elder law attorney to create a POA, the better. That becomes even more so the case if your parent receives a concerning diagnosis.
You want your parent to be able to make informed decisions while they still have the mental capacity to do so. If you wait too long and your parent is no longer considered to be competent to make their own decisions, you’ll be stuck going through a complicated and expensive court process to set up a conservatorship or guardianship.
A POA is a much simpler process and one your loved one has more control over. It really is better to get it done long before you need it.
Once your parents have decided who they want their agent to be and what powers they want to grant them, the hard part is done. Now you simply need to meet with a lawyer to have them draw up the paperwork.
You can find POA documents online that are valid, but it’s better to work directly with an actual lawyer, particularly an elder law attorney. That way you can make sure the document is up to date and reflects the specific desires of your parent.
The document must be signed with witnesses present and notarized. You should make sure that both your parent and the agents that they’ve chosen all keep a copy somewhere safe.
It is important to get POA while your parents are still capable of making decisions for themselves.
Your parents took care of you for much of your life. By establishing a POA now, you are working with them to ensure that you are legally able to help take care of them as well. If your parents have not discussed their retirement and end-of-life plans with you, then there is no time like the present to bring it up.
