A comprehensive estate plan will go beyond the transfer of assets after you die. It will also include preparations for the eventualities of aging.
Many people become unable to handle their own affairs when they reach an advanced age. A legal device that is used to name a representative to act on your behalf is a power of attorney (“POA”). A particular type of POA is used to account for the possibility of incapacity.
Limited and General Powers of Attorney
There are different types of powers of attorney. One of them is a limited power of attorney.
A limited power of attorney can be molded to suit your purposes.
A limited power of attorney grants the representative that you choose (the agent or attorney-in-fact) the power to act on your behalf under limited circumstances. You spell out the nature of these circumstances when you create the device.
There is also a power of attorney called a general power of attorney. The agent is not limited when you create this type of power of attorney. Under a general power of attorney, the agent or attorney-in-fact can do anything that you can do.
This can sound like too much power, and this is why it is possible to create a limited power of attorney instead. However, under some circumstances a general power of attorney is necessary because the person granting it needs a comprehensive level of assistance.
Durable Powers of Attorney & Incapacity Planning
If you were to become incapacitated and unable to make sound decisions, the execution of a power of attorney could be a solution. You name an agent to handle your affairs in the event of your incapacitation.
However, if you want to go this route you must execute a power of attorney that is durable. A standard power of attorney that is not durable would no longer be in effect if the person creating the device becomes incapacitated.
Conversely, a durable power of attorney will stay in effect upon the incapacitation of the grantor. This is why durable powers of attorney are used in the field of estate planning to account for the possibility of incapacity.
There are different types of decisions that may become necessary if you were to become incapacitated. Some would be financial in nature, and some would be medical. You may want a particular person to make financial decisions on your behalf, and a different person to handle your health care decision-making.
You can account for this preference by creating two different powers of attorney: one for health care matters, and one for financial matters. You name two different attorneys in fact, and you have the ideal decision-maker in place for each respective purpose.
To learn more about incapacity planning, we invite you to attend one of our free estate planning seminars or workshops.