A durable power of attorney (POA) enables an individual (the “principal”) to appoint an “agent,” such as a trusted relative or friend, to handle specific health, legal and financial responsibilities. There are two general types of power of attorney:
POA for healthcare: Gives a designated person the authority to make health care decisions on behalf of the person.
POA for finances: Gives a designated person the authority to make legal/financial decisions on behalf of the person.
The financial and health care POAs can be created as separate documents or combined into a single document. Families should discuss these legal documents with their loved ones long before that person starts having trouble handling certain aspects of life. At the time of the signing, the person establishing a durable power of attorney must have the mental capacity to sign a legal document. For example, people with dementia or in late stages of Alzheimer’s disease may not be “of sound mind” and therefore unable to appoint a POA.
A POA can be written so that the transfer of responsibilities occurs immediately. Or, the POA can state that the POA goes into effect only when the principal becomes incapacitated. Until that point, the principal can choose to continue to make decisions on his/her own.
A durable power of attorney is essential because if a person becomes incapacitated or incompetent without preparing this document, family and friends will not be allowed to make many important financial decisions, pay bills or make important healthcare decisions on behalf of their parent. Nor can they do crucial Medicaid planning without resorting to legal proceedings to establish a guardianship.
A Durable POA can include a variety of powers, including:
- windup bank and credit card accounts;
- sell the residence or other real estate;
- resolve issues with tenants or landlords;
- communicate with life insurance and health insurance companies; or
- communicate with government agencies such as the IRS, Social Security Administration, and Medicaid.
I charge a flat fee of $100 for a durable POA, which includes a personal interview to discuss which powers you wish to grant the agent.