We know that it can be challenging to think about who will handle your assets if you become unable to do so yourself. Although this concern starts with your money, have you thought about how difficult it would be for your loved ones to make not only those important decisions on your behalf but also how to care for your home, your children, and your business? Would they know what to do with little to no guidance from you? Even if they did know, would they have legal authority to act?
Often, this is where we start working with a family. These are families in crisis. Although, our goal is to work with you when you are well, have full capacity, and are able to make your choices that protect you and your loved ones, often it is not the case. Instead, through a failure to plan, you and your family are thrown into limbo as you try to obtain legal authority where you can and determine what the best course of action should be based on your circumstances.
This is a very difficult place to be. While it is only natural for us not to want to think about a time when we or our loved ones would be incapacitated or die, it is even worse to think about not having a plan to follow in that exact scenario.
We are here to tell you that it does not have to be this way.
One way to ensure your loved ones will not face this uncertainty is for you to leave your wishes in a detailed estate plan. One part of that deals with planning for incapacity through a durable power of attorney.
The durable power of attorney is a lifetime document within your estate plan that can create a ‘roadmap’ for your agent and loved ones to follow. This document often does not get the credit it deserves because its power and utility is often overlooked until it is too late. Our goal is to share with you tips for creating the right durable power of attorney for you together with a few do’s and don’ts about establishing the right authority for your unique legal planning needs.
1. Make your power of attorney “durable”.
A standard power of attorney allows you to designate a close friend, family member, or trusted advisor as an agent to handle your affairs and make decisions on your behalf. By making this legally-binding document “durable,” each provision you implement remains in effect if you become incapable of making decisions for your own well-being. This will provide an extra security blanket, so to speak, for your estate plan.
2. Discuss your estate planning with an attorney.
A durable power of attorney is too important of a document to create without the assistance of an experienced attorney. It is imperative that your durable power of attorney is set up in accordance with state requirements and that you leave no responsibilities unassigned. All too frequently we see clients take a “short cut” that has devastating consequences.
3. Don’t ignore the implications of life without one.
In the event that you do not appoint an agent or do not leave specific guidelines concerning the handling of your affairs through a durable power of attorney, your loved ones may opt to seek court-approved guardianship of you. This means that a court will designate a person or entity to take over the decision-making on your behalf. Avoid this proceeding by discussing your durable power of attorney with your attorney.
4. Don’t wait to set up your durable power of attorney.
As invincible as we may feel as young adults, serious illnesses and unexpected accidents can affect us at any point in our lives. It is crucial not to wait to set up your estate plan until the first signs of illness or mental incapacity arise. Create your durable power of attorney and lay out your wishes while you are still competent to do so. If you have not already started thinking about your estate plan, the time to begin is now.
5. Think about the legal authority your agent should have (and shouldn’t).
Many attorneys tend to draft ‘standard’ durable power of attorney documents. While there are uniform clauses that should be included, there are also clauses and powers that should be carefully considered. Do you want your agent to be able to gift you money? To whom? Under what circumstances? Do you want your agent to be able to run your business? Who should be your second or third in command, in case your primary decision maker is unavailable?
6. Ask, ask, ask your durable power of attorney questions.
Ask your questions. Your lawyer will not be able to help you unless he or she knows what you are looking for. Start now by making a list of what you want to accomplish through this document and ask your attorney.
These are just some of the key considerations to be aware of when thinking about creating a durable power of attorney. We are here to be a resource for you. Do not hesitate to ask us your questions on this topic.
7. Keep your durable power of attorney updated.
Change is one of the certainties in life. Make sure your power of attorney is updated to reflect any life changes that might affect whom you select as your durable power of attorney agent. You may be surprised, but we have met people who have been divorced for several years who have not updated their durable power of attorney documents and still have their ex-spouse listed as their primary agent!
In addition, may financial institutions and companies have implemented internal policies where they will not recognize the authority of a durable power of attorney that is older than 12-18 months. That means, even if you do not change any powers or decision-makers, it is good practice to have fresh signatures. That is why clients in our Client Care program are able to sign new durable power of attorneys every year!
8. Make sure you include powers to plan for long term care planning.
Engaging in strategic planning to qualify for government benefit subsidies such as Medi-Cal, VA Pension, or the associated Aid & Attendance might seem far off right now. However, to not include provisions that will enable your decision-makers the flexibility to respond to your emerging health and financial situation in the future will severely limit options and quality of care for you.
9. Keep your power of attorney documents accessible.
This might seem like a no-brainer, but it is frightening how often we assume our loved ones know where we keep important documents. Take some time to ensure your decision-makers know where you keep originals, and provide them with a copy. Better yet, introduce them to your estate planning attorney as that relationship will be critical in a time of crisis. Lastly, there are a number of online storage services that allow you to upload important legal and financial documents and share them with your decision-makers.
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