By Eric Reich
We have been conditioned to get a will drafted for us when thinking about our estates, but we often overlook the other crucial documents that compose a complete estate plan. These include a power of attorney (POA) an advanced health care directive (or POLST if preferred), and perhaps a trust. The list can go on, but these are the basics that you’ll want to consider. This week, let’s focus our attention on the POA.
Let’s get the disclosure out of the way first: I am not an attorney. This is not intended to be legal advice, but rather things for you to consider when creating your own estate plan. If you would like a referral to an attorney in order to help you draft your estate plan, we can certainly provide assistance with that. We do not receive any compensation to do so.
A POA is a legal document that grants authority to your agent or attorney. This is typically a relative or close friend since you are granting them the power to act on your behalf. The powers that are typically granted to this person include the ability to make financial transactions on your behalf, including banking, paying taxes, managing investments, etc. These powers may also include making health care decisions as well.
There are several different types of POAs as well as timelines for when they go into effect.
A general POA is among the most common. This type of POA will likely give broad powers to your designated representative and usually go into effect immediately. This general POA would remain valid until you either revoke it or you become incapacitated.
A durable POA is similar to a general POA, but it continues even after you become incapacitated. This is crucial to understand as it is the reason most people want a POA in the first place: to allow someone to act on their behalf when they are unable to.
POAs can also be more limited in nature. You could have a medical/health care POA to only allow someone to assist with health care-related decisions. Limited POAs are not only for health care-related decisions but could also be for any other specific reason, such as representing you in a business transaction or for a limited time period.
It goes without saying that the chosen agent is required to act in your best interest. This is why you want to be mindful of your chosen agent and consider things like conflicts of interest, etc. You do have the power to revoke and/or replace a POA agent whenever you choose as long as you are mentally capable of doing so.
A POA, as mentioned, can become effective immediately or have “springing powers” that make them effective only upon a triggering event such as incapacity or incompetence. Springing powers list the triggering events, incapacity requirements, required documentation, etc. needed for them to go into effect. The POA, in this case, only becomes effective when needed and not immediately.
So, why is a POA so important? We often don’t consider that if something catastrophic happens to us, the world keeps moving. Decisions, bills, etc. still need to be addressed whether we are capable of handling them ourselves or not. The last thing you want to happen – on top of a very serious event that causes you to not be able to handle your affairs yourself – is to not be able to turn to someone else to help you either, as they may be legally unable to do so without a POA other than by more extraordinary measures such as petitioning the courts for guardianship. This is a potentially difficult, expensive, and time-consuming avenue that could easily be avoided with a POA.
Lastly, once you have a POA, make sure you put it on file with the institutions that may require it such as a bank, investment company, etc.
Having a properly drafted POA is crucial to having your wishes carried out. As with all estate planning components, the sooner you consider a POA, the better. Don’t wait until it’s too late to make it a part of your estate plan.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
