What happens to your responsibilities when you become incapacitated? Who pays your bills? Who writes your checks? Who decides where you should live and what happens to your property and belongings?
The best thing you can do is assign someone you trust with durable power of attorney. The time to plan for this problem is before it happens.
Power of attorney
Planning ahead means imagining a time when you might be incapacitated either by age or because of an accident. In this state, you will not be able to make decisions for yourself even though decisions will still need to be made.
In some cases, your spouse can step in for personal matters or your business partner can take charge of business decisions. However, you might not want them to carry that burden, or you might not trust that they have the knowledge or temperament to make good decisions.
That’s why you should arrange for someone you trust to have power of attorney over your affairs. Depending on which state you live in, this person is called an agent or an attorney-in-fact.
Power of attorney can be created with a simple legal document. Although these documents can be found online or at courthouses and some banks, it’s best to consult a qualified attorney to make sure you understand all the intricacies of this decision.
Naming an attorney-in-fact can begin immediately upon signing the document, or you can specify under which circumstances a power of attorney would be activated (called a “springing” power of attorney) and the duties to be followed. You may want your attorney-in-fact to only handle personal affairs, or handle your real estate, or handle business matters.
Power of attorney is different than naming an executor. An executor handles your affairs after you die. The power of attorney is active only while you are alive.
Making the plan ‘durable’
If power of attorney starts immediately upon signing the document, then it becomes invalid if you become incapacitated. If it activates when you become incapacitated, then it becomes invalid when you heal.
It also becomes invalid when you divorce, if your attorney-in-fact is unavailable, if a court invalidates the document, or when you die (at which point your executor takes control of your affairs).
The way to make sure there is continuity in your affairs is to declare a durable power of attorney. If you specifically state that the power of attorney is durable, then it remains in effect until you die.
There are two kinds of durable power of attorney: one is for financial matters and one for matters regarding health care.
Planning ahead for bad circumstances is a difficult responsibility, but it is necessary to spare our loved ones from the pain of having to make difficult decisions during a time of crisis.
