Last week I discussed the reasons you might need to set up a trust at your death for your children, whether they are young children or adults. This week I’ll focus on additional documents that are a critical part of your estate plan.
Picture this. You handle the family’s finances and pay all the family bills. In addition, you own a small business. Among the assets held solely in your name are bank accounts, investment accounts and real estate. You are in control and life is good until tragedy strikes. You’re in an automobile accident which leaves you in a coma. Financial decisions need to be made; checks need to be signed but you are unable to do so. What is going to happen? Someone, typically a family member, is going to have to hire an attorney, go to court and get a Power of Attorney that will permit him or her to act on your behalf….a potentially expensive and time consuming task. A better solution is for you to be “proactive” and have your attorney draw a Power of Attorney before you need one.
A Power of Attorney is a vital document for every adult. This document allows you to appoint another person as your “attorney-in-fact,” which gives that person the authority to act on your behalf in legal matters should you not have the capacity to do so. A power of attorney can be drafted in several forms:
- Springing Power of Attorney. This document only becomes effective under certain conditions, usually due to incapacity. One significant disadvantage of the springing power of attorney is that when someone attempts to use it on your behalf, he or she may be required to “prove” that you are actually incompetent. This can create both inconvenience and significant delays.
- General Power of Attorney. Here, you give your attorney-in-fact the authority to act on your behalf at anytime. However, if you become incapacitated, this document is null and void.
- General and Durable Power of Attorney. This document allows your attorney-in-fact to continue acting on your behalf in the event of your incapacity.
- Limited Power of Attorney. With a limited power of attorney you appoint someone to act on your behalf only under very specific circumstances. One possible reason might involve the signing of a specific legal agreement by your attorney-in-fact while you are out of the country.
What you need to do now. First, you need to decide which Power of Attorney is most appropriate for your circumstances. Then you need to decide whom you would appoint as your attorney-in-fact. If you are married, a natural choice might be your spouse. But you should also have at least one successor attorney-in-fact. It should be noted that if you die, any and all Power of Attorney documents you have executed become null and void. Also, you should redo this document every four to five years. Many institutions such as banks are reluctant to accept a Power of Attorney document that is older than that. These are powerful legal instruments and care should be taken to keep up with them.
While the (financial) Power of Attorney can be done through a service such as LegalZoom.com for less than $100, I strongly recommend that you consult with an attorney familiar with these matters. Your attorney will make sure that the document conforms to Alabama law and can help you decide which type Power of Attorney is best for you.
Advance Directive for Healthcare
Not quite as critical as a Power of Attorney, the Advance Directive for Healthcare outlines your wishes regarding end-of-life care…it speaks for you when you cannot speak for yourself. Typically, it is divided into two parts:
- Living Will. In this section you’ll provide detailed instructions regarding the level of care should you become incompetent and facing a potential end-of-life scenario. For example, assuming you’re in a vegetative state, would you want to remain on a life-supporting respirator? Would you want to remain on a feeding tube? Would you want hydration or pain medicines administered or withheld? For some people these are tough decisions, but I’d suggest that it’s better that you make them than leaving it up to someone else…and that someone might be a physician or a family member. One of the most famous cases happened in 1975 when twenty-one-year-old Karen Ann Quinlan was left in a vegetative state after ingesting Valium and alcohol while also on a crash diet. She was essentially brain dead and her parents requested she be removed from a life-sustaining respirator. Her physicians and the hospital refused and a lengthy legal battle ensued and began a national discussion about right-to-life issues.
- Healthcare Proxy. Here, you appoint the person you’d like to speak on your behalf regarding healthcare decisions. Or, you may state that you are requesting your Living Will instructions be strictly followed, and you explicitly indicate you do not want someone to speak on your behalf. In my experience, most people choose to have a Living Will and a Healthcare Proxy whereby the Living Will expresses your desire and instructions but your Healthcare Proxy can intervene, using their good judgment, if there are extenuating circumstances.
I should note that, generally, Advance Directives for Healthcare documents are not legally binding agreements, but it is rare that their instructions are not followed and accepted by hospitals and physicians. While I prefer these documents be executed with the aid of an attorney, you can download a form for your particular state and complete on your own. You’ll need to pay close attention to the instructions for completing the document, and these instructions will vary by state. For a state-by-state listing of downloadable/printable forms, visit www.WelchGroup.com; click on LINKS, then Living Will- State-by-State.