Planning is the key to aging with dignity. In my “Aging with Dignity Toolkit,” you can learn about certain planning tools that you can use to control how your person and your property are managed as you age.
Following is a discussion of a document known as a “Power of Attorney.” This document is a useful tool that can be used to appoint an individual to care for your finances and property in the event that you are unable to do so yourself.
What is a Power of Attorney?
A power of attorney is a legal document that allows a named person to act on your behalf. If you execute a power of attorney naming someone to act on your behalf, you are known as the “principal” and the person you name to act on your behalf is the “agent.”
Why Do I Need a Power of Attorney?
A power of attorney can be useful for a variety of reasons. For example, you can appoint a power of attorney to manage your bills while you are on an extended vacation. More often however, a power of attorney is a useful tool to use as you are planning to age with dignity. As you age, certain ailments such as dementia or stroke might impair your ability to make decisions, thus rendering you legally incapacitated. In such cases, a power of attorney is a useful tool that allows your pre-selected agent to step in and act on your behalf.
If you are using a power of attorney as a tool to plan for possible incapacity it must be a “durable” power of attorney. If the power of attorney is not durable, the authority that you grant to your agent will extinguish if and when you become incapacitated.
Note that a power of attorney does not allow the agent to make health care decisions on your behalf. If you want to appoint an individual who can make healthcare decisions for you, you can do so by executing a health care proxy and/or living will.
What is Incapacity?
Capacity refers to your ability to make decisions. You are presumed to have capacity unless someone is able to prove otherwise by clear and convincing evidence. This means that the law does not assume that you lack capacity just because you carry a certain medical diagnosis or merely because of your age.
The law provides different definitions and standards for capacity depending on the type of decision you are trying to make. In the context of executing a power of attorney, you have capacity if you are able to comprehend three things: (1) the nature and consequences of the act of executing the power of attorney; (2) the provisions of the power of attorney; and(3) the authority you are granting to the agent under the power of attorney.
When Does the Power of Attorney Become Effective?
The power of attorney becomes effective when you and the agent sign the document. The signatures must be notarized and you must have legal capacity at the time you sign the document.
If you want the power of attorney to become effective at a later date or upon the occurrence of a certain event, you can state this in the document itself. For example, you could specify in the document that you only want the power of attorney to be effective if and when you become incapacitated. If you do this, the agent named in the document will not be able to act on your behalf unless and until you become incapacitated. You might also decide to execute a power of attorney that is effective immediately but allow a third-party (such as the drafting attorney) to hold the document until a time or event that you specify.
Remember, a power of attorney is a very powerful instrument – it allows the person named as your agent to access bank accounts and other property on your behalf. Thus, if you do not want it to be effective immediately, make sure to say so in the document or store the document with a trusted third-party.
What if I Change my Mind?
A power of attorney is revocable. This means that you can completely revoke the document or modify it at any time. Additionally, the power of attorney terminates upon your death (at that point, the executor or administrator steps in to act on your behalf in order to distribute your estate).
What if I Become Incapacitated and I do not Have a Power of Attorney?
In the event that you become incapacitated and you have failed to execute a power of attorney or other planning device the most likely outcome is that a guardian will be appointed by the court to act on your behalf. Although you will likely be represented by an attorney during the guardianship proceeding, you might be unable to communicate your wishes at that point. Thus, a power of attorney is a valuable planning tool that allows you to specify the person who you believe is the best person to represent your interests in the event that you become unable to do so yourself.