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Powers of attorney: what are they, and why do you need one?

Most of us have, at some time or another, heard the phrase "power of attorney." That being said, however, many people aren't quite sure what exactly powers of attorney are, what they do, or why they are actually vitally important parts of any comprehensive estate planning strategy. This post will attempt to answer those questions and outline a few reasons why you - yes you - need a power of attorney.

What is a power of attorney?

A power of attorney is a legal document that gives someone else the ability to make decisions on your behalf in the event that you cannot do so yourself. Powers of attorney are generally classified into two broad categories:

  • Financial - these allow the person of your choosing, known as your "agent" or "attorney in fact" to make financial decisions on your behalf. This could include paying your bills, selling your home and handling your investment accounts, among others.
  • Healthcare - these grant the designated decision-maker the authority to decide matters concerning your medical treatment. Possibilities include what hospital you should be taken to in the event of an emergency, which physicians should treat you, who will be granted access to your medical information, what course of action to take when presented with treatment options, whether you will be moved to a residential care facility for long-term care, and more.

Why do you need a power of attorney?

Like all aspects of estate planning, powers of attorney are designed to ensure that you stay in the proverbial driver's seat. These documents allow you to, ahead of a potential crisis, designate a person whom you trust to make these decisions in a way that would be consistent with your desires and best interests. If you don't have these decision-making directions in place, then the law or the courts could end up dictating how your affairs are handled should you become incapacitated.

A practical example

This is particularly important nowadays with blended and non-traditional families and relationships becoming much more mainstream. It is well-illustrated with an example.

Mary and Steve are in a long-term committed relationship but have never married. They have been together for years and are, for most intents and purposes, virtually indistinguishable from many married couples. They have not, however, entered into a recognizable common law marriage under Texas law. Mary has an adult daughter, Sue, from a previous relationship (from whom she is estranged and has not seen or spoken to in several years), but has no other family. Neither Mary nor Steve has a power of attorney or estate plan in place.

Mary is involved in a car accident and suffers serious injuries. Life-saving measures were taken as part of emergency protocols, but Mary is in a coma and might not ever recover. Doctors need input as to what steps should be taken next in terms of treatment, so, in the absence of any prevailing documents, they look to her next of kin for guidance.

It may seem, logically, that Steve should be the one to make these decisions for her. After all, he has been in her life day-in and day-out for years. He understands her wishes, needs and desires much better than anyone else would be expected to. While it may make sense for Steve to be the decision-maker, in this instance, he has no biological or legal tie to Mary. In the eyes of the law, allowing Steve to decide would be akin to letting a co-worker or neighbor handle things.

Instead, Mary's daughter, Sue, is legally her next of kin, and would be tasked with the responsibility. She could, of course, decline it and instead appoint Steve, but that extra step would have to be proactively taken. Steve also has the right to bring an emergency guardianship proceeding, but the onus for that would be on him, and the court would have to decide the matter if Sue objected to his appointment. All of this could have been avoided if Mary had a power of attorney in place designated Steve as the person to make medical decisions on her behalf.

Your own planning

If you don't already have an estate plan in place, you need one. This is true whether you have a modest estate or an extravagant one, mainly because estate planning isn't just about assets: estate plans are no longer just for what happens after you die, but can have a huge impact on your life as well because of powers of attorney, guardianship designations, long-term care provisions and lifetime asset transfers.

To get started on your estate plan, contact an experienced local estate planning attorney - preferably one board-certified in estate planning and probate - as soon as possible.

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