When someone is considering putting an estate plan in place, people sometimes focus only on death planning or only on documents to assist with the care or management of a loved one’s assets during their lifetime. It is important that both types of planning are included in your estate plan.
Important documents for lifetime planning are well-drafted powers of attorney. This legal tool allows another person to make decisions for you. There are two primary types of powers of attorney.
The first is a general power of attorney that grants someone the authority to make personal and financial decisions on your behalf. For instance, if you are on active duty and are unmarried, you may designate a parent to serve as your agent under the general power of attorney. While deployed, a parent could pay your bills, access your accounts, and spend the money as if they were you. Here are some of the things they can do in your name:
- File your taxes
- Buy or sell your home
- Make investments
If you feel a general power of attorney gives too much discretion to your parent or other chosen agent, you can choose to limit them in the powers they receive and the time frame that the document is effective.
Further, a general power of attorney is an important tool to have on hand in the event you’ve become incapacitated and need your designated person to manage your financial affairs. Failure to have a general power of attorney can result in your family having to file for a conservatorship against you in order to manage your assets.
The second document that everyone should have is a healthcare power of attorney. These are often referred to as healthcare powers of attorney because they enable someone else to make medical decisions for you. If you are healthy now, why would you need this document? Because no one is immune to accidents. If you get into an accident that prevents you from being able to make your own healthcare decisions, your designated person (also known as an agent) can make medical decisions for you. Without one, your family members may have to file for guardianship in order to be able to make your healthcare decisions. These proceedings can be time-consuming and costly.
When you combine these two powers of attorney, they give you peace of mind in knowing that you have a trusted person who can access your accounts and advocate for your medical treatment if you are unable. They allow your family to side-step the court system by avoiding a need for a guardianship or conservatorship proceeding, saving valuable time and money.
Power of Attorney Doesn’t Replace an Estate Plan
However, a mistake that people make is that one or two powers of attorney do not replace an estate plan. Imagine you have an elderly parent who needs assistance. You contact an estate planning attorney, and they create a general power of attorney and healthcare power of attorney. After your parent meets with an attorney and signs it, you have a strong foundation for assisting them during their lifetime. You can buy your parent groceries with their money, make mortgage payments, and manage their investments.
It is critical to remember, however, that a power of attorney only gives you this authority while the principal (your parent) is still alive. If your parent didn’t do any other estate planning, you would no longer have access to their accounts upon their death. Their assets will pass through intestate succession, and the estate’s appointed personal representative will control the finances. If you had the insight to assist your parent in creating a power of attorney, take the next step by diving deeper into estate planning to prepare for death planning as well.
They can establish a revocable trust that makes them the trustee and you the successor trustee—which enables you to manage any assets that are inside the trust. Or, if they choose to draft a will, they can name you as the estate’s executor. The key is for you or your loved ones to plan for both death and lifetime planning for a complete estate plan.
Contact an Estate Planning Attorney
The trusted estate planning attorneys at Select Law Partners, PLLC, will assist you with planning for the future by creating wills, revocable trusts, and general and healthcare powers of attorney. Contact us today to schedule your consultation.
Sara Josey
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