In the wake of the COVID-19 pandemic, the importance of estate planning has never been more apparent. The reality that anyone can face sudden incapacitation underscores the necessity of preparing for unforeseen circumstances. Research indicates that the likelihood of experiencing mental or physical incapacity rises significantly as individuals approach their senior years. By age 65, this probability stands at 50%, steadily increasing until age 80, where it peaks at a staggering 75%. Amidst these statistics, the role of a Power of Attorney (POA) emerges as a crucial component alongside traditional estate planning documents like the Last Will & Testament.
Ensuring Financial and Healthcare Decision-making
Contrary to common belief, the designation of a spouse does not automatically confer authority over an individual’s financial and healthcare decisions in the event of incapacitation. Specific provisions within a Power of Attorney are necessary to grant such authority. Typically, POAs encompass two distinct realms: healthcare and financial matters.
Advance Healthcare Directives
Advance healthcare directives serve to safeguard an individual’s healthcare preferences when they are unable to articulate decisions themselves. Variably termed as Durable Power of Attorney for Health Care, Medical Power of Attorney, or Health Care Proxy, this document designates a trusted individual to make healthcare decisions on behalf of the incapacitated individual. Additionally, the Living Will component outlines personal treatment preferences, while an Advance Directive combines both the Living Will and Power of Attorney for Healthcare. State-specific laws govern these directives, emphasizing the importance of adherence to local regulations.
“Contrary to common belief, the designation of a spouse does not automatically confer authority over an individual’s financial and healthcare decisions in the event of incapacitation.”
Financial Power of Attorney
The financial Power of Attorney empowers a designated agent to manage an individual’s financial affairs in the event of incapacitation. Governed by state laws, this POA can assume the form of a General or Limited POA. While a General POA grants broad financial authority to the agent, a Limited POA restricts decision-making to specific financial matters, such as bill payments or retirement account management.
Durable Power of Attorney (DPOA)
A cornerstone of estate planning, the Durable Power of Attorney remains effective even in cases of incapacitation. By appointing an agent, individuals can delegate authority over property management, financial transactions, and document signing, among other specified matters. Notably, while a DPOA agent may handle financial affairs, decisions regarding healthcare remain outside their scope.
