Having a power of attorney (or POA) is at least as important as having a will.
That’s the opinion I’ve come to after 24 years helping individual clients and families in private practice.
As people’s lifespans have increased, many spend more years than ever with a weakened ability to manage their own affairs. They increasingly rely on the help of a family member or friend to pay bills, manage finances, and deal with issues like taxes, insurance, and medical coverage.
For others, a temporary illness, accident, or absence from the state or country means someone else needs to manage personal affairs for a while, often on short notice.
A POA appoints another person (called your “agent”) to act on your behalf, usually with regard to financial, property, and legal matters. For the following reasons, a POA makes up a vital part of your estate planning arsenal.
Your entire estate could be distributed during your lifetime.
Here is the reason why I believe a POA is at least as important as your will.
What you now own, or major portions of it, could be spent or given away during your lifetime. For example, a person with a net worth of $400,000 could need skilled nursing care for several years, costing in excess of the net worth. Illness or misfortune could also befall another family member, requiring a major contribution from you.
Whatever the circumstances, you should appoint someone whose judgment you trust to make decisions for you, and carefully define your agent’s power. That way, you have more say in what happens to your assets if you can’t make your own decisions.
A POA allows your agent to protect your assets.
An elder law attorney can help you identify ways in which your assets could be at risk during your lifetime, especially in your senior years. Using that knowledge, you and your attorney can craft a POA that would give your agent the right mix of powers to protect those assets for you and other family members.
Suppose you are married and have a disabled son or daughter. If someday you need to apply for Medicaid benefits to pay for nursing home care (as many people do), your agent should have the ability to transfer assets to your spouse or disabled child. Those transfers would protect the assets while still allowing you to qualify for benefits. Without the right powers built into your POA, that opportunity could be lost.
A POA is preferable to guardianship.
If you have no POA, a court could appoint someone to make property or healthcare decisions for you. But guardianship comes with distinct disadvantages:
- Delay. In most cases, obtaining a guardianship order from a court takes at least 30 to 60 days in Pennsylvania.
- Cost. Legal costs for obtaining guardianship can easily cost several thousand dollars in legal fees, and much more if any part of the process is contested.
- Red tape. A court-appointed guardian must take additional steps to comply with court rules that would be unnecessary for someone acting on your behalf under a POA. These include filing an inventory of all your assets; filing annual reports with the court; and asking court permission anytime the guardian needs to spend money out of principal. Many of these steps also require additional legal fees.
- Lack of choice. When you appoint an agent with your POA, you choose the agent. In a guardianship proceeding, a judge will make the choice for you.
Even a POA carefully tailored by an experienced attorney costs less than a typical guardianship. You can choose your own agent. The agent you pick can act on your behalf immediately, or on short notice, and without unnecessary red tape.
Get professional help.
For these and many other reasons, every adult should have a POA. Given its importance in the management of your estate, I recommend using a well qualified attorney to help you plan and design a POA that will suit your individual needs and put you in good stead if the need arises.
Free Estate Planning Workshop
Upcoming WorkshopsFebruary 6, 2018 - 2:30 pm – 4:30 pm
February 21, 2018 - 5:30 pm - 7:30 pm
March 6, 2018 - 2:30 pm – 4:30 pm
March 29, 2018 - 5:30 pm - 7:30 pm