We all know what a Will is and why we need one – a Will outlines how you want your stuff and assets distributed when you die. Pretty simple. But what is a Power of Attorney and why is to so important?
When You Are Disabled – Who's in Charge?
But what happens if you become disabled and cannot act for yourself? Say you have a stroke, or are involved in a car accident, or as we are now experiencing, have contracted the Coronavirus and are not able to manage your own affairs? In those circumstances the Will is of no help since you are not dead (thankfully!) but simply incapacitated, at least temporarily. That's where a Power of Attorney comes into play.
Appointing an Agent
Like a Will in which you name an executor to settle your estate, a Power of Attorney is the document in which you (the Principal) name an Agent, or what the law refers to as an “attorney-in-fact,” to act on your behalf while you are unable to do so. In this respect, the Agent becomes your legal representative and is regarded under the law as a fiduciary, which means the Agent must act in your best interest in accordance with your known or expressed wishes. Giving someone you trust this type of authority is extremely important since without it your financial affairs cannot be managed if you are unable to manage your own affairs. And if the situation is prolonged or critical, you may leave your family and loved ones with no alternative but to file in court to become your legal guardian and have you declared incapacitated. Trust me, you do not want to get the court involved in managing your affairs. By not having a Power of Attorney, you also run the risk of having someone managing your affairs (like your brother-in-law God forbid!) who you otherwise would not want involved in your private affairs. That's not good. You can easily avoid that by signing a Power of Attorney and designating who you want to handle your financial affairs.
Your Spouse Does Not Automatically Become Your Agent
Many married people think they do not need a Power-of-Attorney since they believe their spouse can act for them if something happens to them. That is not true. Yes, a spouse can access accounts and certain assets that are jointly owned, but that's because the spouse is a joint owner of the assets, not because a spouse has the inherent legal authority to access accounts owned by the other spouse alone. In order to access your spouse's assets (for example their 401K plan or investment accounts or pension or government benefits), you must have a valid Power of Attorney in place. And in order to sell or transfer real estate, you would also need a Power of Attorney even if the property is jointly owned.
Power of Attorney versus an Advance Medical Directive (a/k/a Living Will)
Keep in mind the Power of Attorney is used to manage your financial affairs and is typically not used to manage your medical affairs. For medical decision making, the proper document is referred to as an Advance Medical Directive, or what is commonly referred to as a Living Will. Like a Power of Attorney, the Living Will allows you to name an Agent (called a Health Care Proxy or Representative) to make medical decisions on your behalf if and when you are unable to do so. Both documents, along with your Will, should be part of your estate plan.
A good article about the need for a Power-of-Attorney in these precarious times can be accessed here.
At Serra law Group, we developed and have been using for several years now an on-line platform for these types of basic estate planning documents like a Power of Attorney. We call this platform Smart Law because it is a simple and efficient way for you to put into place a comprehensive estate plan at a fraction of the cost. It also allows you to do all of this without having to leave your home. It is just a smart way to get these planning documents done. Check out our Smart Law platform here.