Last week we discussed the necessity of having a Last Will and Testament or a simple will drawn up and properly executed in case of the worst happening. This week we will be focusing on a document that is critical to have in place before you are ever incapacitated, whether it be from a car accident, a medical condition or any other serious life event: the Durable Power of Attorney.
What is a Power of Attorney?
Before we get there though we need to lay the groundwork. A Power of Attorney is a legal document that allows you to appoint a person or organization to manage your affairs. In general, the person you appoint to hold your power of attorney as your designated agent, as they are referred to, can do almost anything you can do. This includes:
Entering into contracts on your behalf
Handling financial and business matters on your behalf
Employing professional help for you
Selling and buying property on your behalf
A Power of Attorney document can be as limited or broad in scope as you are comfortable with. People and businesses regularly utilize limited Powers of Attorney when employing agents for business deals to act on their behalf and in their best interest.
How is a Power of Attorney used in Estate Planning?
When it comes to estate planning, the Power of Attorney is a powerful tool in ensuring that someone is always there and authorized to manage your affairs when you are no longer able to. If you ever become incapacitated, a Power of Attorney ensures that there is someone who will have access to your accounts, be able to pay your bills, employ the medical or professional help that you may need and to also look after your family if necessary.
What makes it Durable?
In particular, attorneys utilize the Durable Power of Attorney rather than a general Power of Attorney. The key difference is that unlike a general Power of Attorney, the Durable Power of Attorney lasts through your incapacity. If you are ever in a coma, deemed incompetent by the state or have any other condition that disqualifies you from being able to run and govern your own life or take care of yourself, the Durable Power of Attorney that you made before you were incapacitated continues to be effective. This is in contrast to the general Power of Attorney that typically automatically is revoked upon incapacity.
Failure to Plan Leaves Your Future Uncertain
One of the biggest advantages of having a Durable Power of Attorney in place is that in the event that you are incapacitated, you will already have designated ahead of time who you wish to take care you. This means that you can avoid having to go through costly, lengthy and litigious guardianship proceedings. It also means that you are less at risk of having the state of Indiana appoint someone to look after you and your affairs that you are uncomfortable with or would not want to have access to your accounts and finances. Generally, as long as the agent appointed by the Durable Power of Attorney is competent and carrying out their duties, the wishes of the incapacitated person as written down in the documents will survive a challenge for guardianship in a court.
Durable Power of Attorney Documents must be executed ahead of time
Like all estate planning documents, the Durable Power of Attorney cannot be properly executed or drawn up after you are incapacitated. Therefore, it is of the utmost importance to think ahead and take action. Failure to do so can have catastrophic effects on you and your family. Failure to do so means that someone you don’t want may end up managing your life at a time where you cannot object.