Think a spouse or child can simply step in and make financial and health decisions for you in the event you are incapacitated? Not so fast. Compliance departments at financial institutions are developing increasingly stringent policies regarding with whom they share information. If you’re incapacitated, you better have a properly drafted power of attorney. Without it, there is no mechanism for your family to begin making decisions for you. The alternative, is guardianship.
The power of attorney is the cornerstone to any estate plan. It is executed in advance of a disability where the principal appoints another (“agent”) to manage his/her affairs. It ensures a level of flexibility critical to decision-making in the event the principal is unable to handle affairs.
In order to break through the strict policies of financial institutions and health facilities, a specific, properly drafted Power of Attorney is imperative. Many powers of attorney are “boilerplate,” meaning they’re not tailored to the situation. For example, many older powers of attorney fail to contain important HIPAA language needed to deal with payment of medical bills.
According to the government, there is a 70% chance you will need some type of long-term care. For your agent to have the ability to protect assets, specific language must be included. A financial power of attorney should contain strong gifting language so that your agent will have the power to protect assets and hasten your ability to receive benefits.
If you don’t have a specific, tailored power of attorney in a time of need, the only option may be guardianship. It’s lengthy and can be costly (thousands of dollars). Plus, it’s overseen by the courts. This means that your loved ones will be restricted. It may also mean that your assets are exposed to creditors or a long-term care spend down. Having a specific power of attorney will prevent the need for guardianship.
Having strong powers of attorney is the only way to ensure your goals and needs are met in a time of crisis. When preparing powers of attorney, make sure your agent has the ability to access your records and has the ability to make gifts. If you don’t have powers of attorney or haven’t had them updated in the last few years, it may be time to sit down with an attorney to discuss your goals.