Though it may be difficult to think of a time when we will need help in managing our affairs or taking care of ourselves, a thorough estate plan should take this possibility into account. You can plan ahead by preparing a few simple legal documents to ensure that your medical and financial wishes are carried out by someone you trust if you are unable to speak and act for yourself. Granting someone you trust a "power of attorney" is one method of arranging for person to manage your affairs if you are unable to do so.

There are different kinds of powers of attorney, but the most common are: the health-care power of attorney and the financial power of attorney.

We strongly encourage people to seek legal counsel prior to signing any power of attorney, and we recommend that clients avoid preprinted power of attorney forms.

Health-Care Power of Attorney

A health-care power of attorney is a document that designates a representative to make medical decisions for you if you cannot make them for yourself. As with all legal documents, you must be mentally competent and of sound mind at the time you prepare and sign it, so you must do it before there is a problem. The health-care power of attorney will remain valid after signing until you revoke it - even if you later become mentally incompetent.

The person you appoint is called a health care agent or health care representative. Depending on how the document is drafted, you may give this person the ability to make all of the same decisions (consent to surgery, hiring/firing doctors, give, withhold, or stop any medical treatment, etc.) that you could have made if you were competent. It is very important that you have the utmost confidence in the person to whom you grant the health-care power of attorney and we recommend that you talk to the person to whom you are granting these powers prior to signing any such documents.

We typically recommend, but do not require, that you appoint someone that lives in the same state that you do, and that you also name a back up agent "just in case".

For more information on health care powers, see What Is a Living Will?

Financial Power of Attorney

Most estate planning attorneys recommend that clients execute a financial power of attorney. There are different types - some become effective immediately upon signing, some become effective only upon a finding of incompetency, and there are pros and cons with each type.

A financial power of attorney designates someone to handle your financial affairs. This can be analogous to a blank check, as the person with the original may be able to use it even if you are healthy and competent. While the intention is frequently for usage only if the client becomes ill or incompetent, the document may not have such a restriction. Also, a power of attorney may not be accepted if it is "old" so this is a document that must be kept up to date if you intend to rely on it in the future. We strongly recommend that you review the document carefully before signing, that you understand the implications and ramifications, and that you discuss it thoroughly with your attorney.

It may be appropriate to grant broad powers, or there may be reasons to grant only specific and narrowly drawn powers. Common powers that people tend to include are activities such as: opening mail, paying everyday expenses, filing and paying taxes, maintaining property, collecting Social Security benefits, investing money, filing insurance claims, and operating a business.

If a person does not sign a financial power of attorney and becomes mentally incompetent, there is a process to ensure they have assistance. A loved one, or medical facility, or any concerned party, may petition the court for the appointment of a conservator (essentially a financial guardian) who will assume and take over the person's finances. The conservator, in turn, will report to and be overseen by, a probate judge. As with all probate processes, there are pros and cons of going this route, but many people dislike the public nature of the process and would prefer to handle the matter privately if possible.
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