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Powers of attorney (POAs) are a key part of advanced directives that prepare for potential incapacitation. The two main aspects are health care power of attorney and financial power of attorney which outline what decisions the agent can make for you. Then, whether it is limited or durable power of attorney outlines when the powers come into effect.
Once the principal signs the power of attorney document, it can be given to third parties, such as a bank or hospital, to show proof that the agent has the authority to make decisions on behalf of the principal. This may occur years after the principal signed and created the power of attorney. This is intentional, as estate planning should be engaged as early in life as possible to cover unforeseeable future scenarios.
It can sometimes be useful to give copies of your power of attorney document to important third parties in your life, such as your bank, financial advisor, and healthcare providers, ahead of time so that they have it on file. Doing so can create an easier transition and understanding when your agent has to do something for you in the future. This way, the third parties are not shocked or surprised by the agent’s attempts to manage your property or make a medical decision.
Power of Attorney documents are vital components of an estate plan and often serve as life-saving transactional documents during an emergency. Powers of attorney can also be customized to fit special scenarios, such as limited powers of attorney which expire after a certain task is completed or upon a set timeline.
Business powers of attorney can allow business owners to grant appropriate rights and powers to their most trusted employees to eliminate red-tape, hassles, and delays when the employee is accomplishing tasks or taking actions on behalf of the company. However, most powers of attorney are either medical or financial.
A medical power of attorney, also referred to as a healthcare power of attorney, authorizes the agent to make decisions about surgeries, medications, treatment, and other healthcare needs.
This takes effect when a person is incapacitated, as determined by two doctors. If the principal is conscious and able to communicate and think clearly, they retain the right to make their own decisions.
Other advance directives related to medical care include living wills and Do Not Resuscitate (DNR) Orders. Together, these three documents cover a variety of medical scenarios and ensure the principal’s wishes and best interests are known and respected.
A financial power of attorney grants the agent the authority to manage the financial affairs of the principal in specified circumstances. When that authority is granted, the agent can manage bank accounts, pay bills and taxes, buy or sell property, manage investments, and more.
There are multiple types of financial powers of attorney that serve different purposes.
Durable Financial Powers of Attorney grant the agent authority to act if the principal is incapacitated. This is a good safeguard to have in place at any age.
General Financial Powers of Attorney provide board authority for the agent to manage financial matters, even when the principal is not incapacitated. This would be appropriate for elderly individuals who still have their mental faculties but for whom regular financial management has become too much to handle.
Limited Financial Powers of Attorney grant authority to the agent for specific tasks or a set timeframe. For instance, if the principal will be living abroad for a while but still has financial matters that need dealt with while they are gone.
The person creating the power of attorney must be of sound legal mind and in control of their reasonable logic and mental faculties. They cannot be coaxed, confused, tricked, or pressured into signing a power of attorney against their will and without their informed consent. This also means a person is unable to create a legal document if they have lost their ability to reason due to drug or alcohol use or mental disability.
Failure to comply with this most essential requirement can lead to legal challenges, which could cause a court to strike the power of attorney down as null and void. In a worst-case scenario, there could be criminal charges against the person who pressured or duped the principal into creating the power of attorney, especially if large amounts of money were involved or if harm came to the principal due to the agent’s actions.
A financial power of attorney should be signed by a notary. For a healthcare power of attorney, two witnesses are needed. Those witnesses cannot be related to the principal or financially motivated. Some medical staff are prevented from acting as a witness, since that could be perceived as a conflict of interest.
While financial powers of attorney do not require witnesses and healthcare powers of attorney do not require notarization, it’s often advisable to still use them if they are available, since it adds to the document’s legitimacy if it is ever challenged.
It’s best to have an attorney create your POA. Your powers of attorney are some of the most important documents in your estate plan. They have a direct impact on what may happen to you medically and financially when you are most vulnerable. If they are incorrectly completed, they may not be honored, and a court may declare them invalid. An attorney will ensure they are appropriately set up to achieve your goals.
Choose what types of power of attorney you need. Most people should have a medical power of attorney and a durable financial power of attorney, but there may be reasons to have different types of power of attorney in addition or instead.
The person you choose to be your agent should be someone you trust and who is competent enough for the responsibilities they will bear. If there’s no one in your life you want to fill this role, you can hire a professional.
The attorney will draft the power of attorney based on your needs and specifications. Once drafted, you’ll review and sign the document with witnesses and/or notarization.
The type of power of attorney you are creating will determine if you need witnesses or notarization. Many attorneys recommend having both even when it is not strictly required.
Provide copies of the signed power of attorney to your designated agent and relevant third parties. When banks, medical providers, and other relevant institutions have your POA on file, it’s easier for the agent to act on your behalf without undue hassle.
If circumstances have changed and you want to change your power of attorney, it’s usually best to create a new power of attorney. In addition to working with an attorney to draft the new document to add, remove, or replace the agent in your previous documents.
Speak with your attorney on whether to sign a formal termination or other cancellation of the previous power of attorney. It is usually not enough to simply destroy the original power of attorney. You may need to provide a signed termination document to third parties who have your previous power of attorney on file as well.
If you do not have a power of attorney in Wisconsin and it becomes evident you need one, a family member or friend may need to petition the court to appoint a guardian for you.
This process is time-consuming, and it often is necessary during time-sensitive circumstances, resulting in unnecessary delays in important decision making. It can also be contentious and expensive, if family members disagree on what is best for you.
Most importantly, the outcome may not be what you would have wanted for yourself. Making your wishes known in advance through legal documents ensures your wishes are respected when you are at your most vulnerable.
Understanding the impact of creating Powers of Attorney for your healthcare & financial decisions is important. Our attorneys are here to help navigate this important step in your planning.
