How to Draft a Will – 10 Steps to Choosing a Power of Attorney
KEY POINTS
Empower Your Advocate
A Power of Attorney empowers a trusted representative, shielding against life's uncertainties while retaining control.
Versatile Safety Net
Beyond estate planning, it's a flexible safety net for life's challenges, providing a reliable guide.
Trust in Action
It reflects your unwavering trust, granting authority for healthcare and finances.
Power of Attorney Value
A power of attorney can be a critical part of your estate planning process.
Envision a robust shield against life's uncertainties, a legal document that empowers a trusted individual to be your unwavering advocate.
A Power of Attorney isn't about giving up control; it's about constructing a safety net to protect your interests in your absence.
Life's twists are inevitable, but with a Power of Attorney, you are equipped with a roadmap to navigate complex financial and health decisions confidently.
Whether it's a medical crisis or intricate finances, a Power of Attorney ensures your voice is heard even in challenging times. It symbolizes unshakeable trust and your commitment to securing your future, all in one essential document.
What is a Power of Attorney?
A Power of Attorney is a legal document that lets one person (the principal) designate another (the agent) to make decisions on their behalf. The principal creates this document, outlining the agent's powers.
There are two primary types of power of attorney,
Healthcare Power of Attorney
This is a legal document enabling the principal to designate a trusted agent or healthcare proxy to make medical decisions in their place when they're unable to do so.
It ensures the principal's medical preferences are honored, particularly when they're incapacitated, ensuring the agent can make treatment choices based on the principal's expressed wishes or best interests as outlined in the document.
It's a vital component of advance care planning, granting individuals control over their healthcare decisions when they cannot advocate for themselves.
Financial Power of Attorney
This is a legal document that authorizes the principal to designate the agent to make financial decisions (e.g., investing, taxation, budgeting, bill/debt management).
It is an essential estate planning tool, granting individuals control over their financial decisions when they cannot advocate for themselves due to absence, illness, or incapacity.
The financial power of attorney consists of three sub-categories,
General
The principal grants broad authority to the agent to make legal and financial decisions. This is typically utilized when the principal anticipates being unavailable or unable to personally handle these matters.
Durable
This is like the general power of attorney except that it remains in effect if the principal becomes mentally incapacitated or unable to make decisions.
Limited
The principal grants specific and restricted authority to the agent for a defined purpose or defined period (e.g., selling a property).
In essence, a Power of Attorney authorizes an agent to act for the principal in financial, legal, and personal matters, ensuring the principal's interests are upheld in various situations.
Power of Attorney vs. Executor
A power of attorney is not the same as an executor that is appointed in a legal will.
|
Power of Attorney |
Executor |
|
|
Role |
Appointed in a legal document to make financial, legal, and sometimes medical decisions during the individual’s lifetime |
Appointed in the will to administer a person’s estate after death |
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Activation |
Effective when the individual becomes incapacitated or unable to make decisions for themselves |
Effective upon the testator’s death |
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Responsibilities |
May include managing financial affairs, signing legal documents, paying bills, and making healthcare decisions |
Distributing assets, settling debts, paying taxes, and carry out the provisions of the will |
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Scope |
Scope can vary from very broad to very narrow |
Commences upon death of the testator and confined to the instructions outlined in the will |
|
Duration |
Remains in effect if the individual is alive and is incapacitated or unable to make decisions for themselves |
Ceases once the estate has been fully administered and distributed as per the will |
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Power of Attorney |
Trustee |
|
|
Role |
Appointed in a legal document to make financial, legal, and sometimes medical decisions during the individual’s lifetime |
Typically appointed in the trust document to manage and administer assets held in a trust on behalf its beneficiaries |
|
Activation |
Effective when the individual becomes incapacitated or unable to make decisions for themselves |
The trust and the trustee’s authority can commence during the individual’s lifetime or upon their passing depending on the type of trust |
|
Responsibilities |
May include managing financial affairs, signing legal documents, paying bills, and making healthcare decisions |
Investing, asset protection, and distributing the trust’s assets as per the terms and conditions of the trust |
|
Scope |
Scope can vary from very broad to very narrow |
Scope can vary widely depending on the trust document |
|
Duration |
Remains in effect if the individual is alive and is incapacitated or unable to make decisions for themselves |
The trust document will specify the duration which could extend beyond the settlor’s lifetime and covering future generations |
Does a Power of Attorney Need to Be a Person?
A power of attorney can involve agents and entities, not just individuals. Agents may include a lawyer, board of directors, corporate officer, trustee, non-profit organization, and more. It is important to ensure such designations comply with laws governing the respective jurisdiction.
Now that we have clarified the nature of a power of attorney, let’s go through the process of choosing a power of attorney.
10 Steps to Choosing a Power of Attorney
Choosing a power of attorney is a significant and complex decision. Several key factors should be considered to ensure that your wishes are executed as desired.
Here are 10 important steps to take when selecting a power of attorney:
1. Self-Assessment
Allocate some time for reflection and gain a deep understanding of your own values and requirements. Reflect on the extent of authority you are comfortable granting to the power of attorney and the specific situations or conditions under which this authority should come into effect.
2. Identify Priorities
Priorities will be dependent upon the nature of the power of attorney.
Healthcare Power of Attorney
When choosing a healthcare power of attorney, prioritize trust, understanding of your values, availability, and communication skills. Qualities like empathy, strong decision-making, and advocacy is also essential. They should be reliable, organized, and respect privacy. Ideally, they should also have some knowledge of the relevant healthcare laws.
Financial Power of Attorney
When choosing a financial power of attorney, prioritize trust, financial knowledge (e.g., finance, budgeting, investments, taxation), and effective communication.
They should feel comfortable engaging professional advisors, as necessary, to provide guidance on complex finance matters.
Look for qualities like honesty, strong decision-making, and organization. They should respect your financial privacy and understand relevant laws.
3. Research Legal Requirements
Eligibility criteria can vary depending on the jurisdiction. Typically, it will encompass a minimum age falling within the range of 18 to 21 years old, and factors like citizenship and a police background check may also play a role in determining eligibility.
4. Partner Consultation
Start Early
Having open and early discussions with your partner about your healthcare and financial power of attorney choices is wise. It ensures alignment of preferences and responsibilities, preventing disagreements and conflicts. Start these conversations early to allow ample time for thorough decision-making.
Time Commitment
Be ready to invest a significant amount of time, as reaching a consensus may require compromise and an extended timeline.
Family Consultation
At an appropriate point, consideration should be given to involving other family members in the process. Immediate family members like children or siblings, may be able to provide valuable insights into the strengths and weaknesses of your potential candidates.
Trusted Advisors
Similarly, trusted friends, mentors, or advisors may also be able to provide objective opinions and insights on the potential candidate’s suitability.
5. Identify Candidates
Create a list of potential candidates. It may consist of family members, friends, or trusted professionals.
It's advisable to compile multiple names as circumstances can evolve and your primary candidate may not be accessible when the need arises.
Assess each candidate based on the priorities established above. Maintain a written record summarizing the pros and cons of each candidate as they relate to your priorities.
6. Advisory Team
Your selected candidate might find it beneficial to seek assistance from independent consultants when handling your healthcare and financial matters.
In healthcare, these decisions can involve granting consent or making choices regarding treatments, healthcare providers, medical tests, medications, end-of-life plans, and selecting care facilities, among other things. Valuable insights can be obtained from healthcare professionals like doctors, specialists, nurses, caregivers, and other healthcare experts.
In terms of financial matters, these decisions can encompass aspects such as investments, taxation, and legal affairs. It is advisable to furnish your chosen candidate with a curated list of recommended advisors who can provide guidance in these areas throughout the decision-making process.
It is crucial to confirm that your candidate is comfortable with the prospect of collaborating with a team when circumstances require it. This ensures their ability to oversee your healthcare and estate affairs in alignment with your specific preferences and desires.
7. Conflicts of Interest
It is vital to assess potential conflicts of interest when appointing an agent under a power of attorney, whether for financial or healthcare decisions. Consider the candidate’s personal and financial relationships with beneficiaries, as well as their own financial interests.
Avoid designating someone who may have a real or perceived conflict of interest that could compromise their impartiality in executing your estate, making financial decisions, or managing your healthcare.
For instance, if the beneficiaries are family members, it may not be advisable to appoint a business partner as an agent for financial matters, as their involvement could create an actual or perceived conflict of interest.
Similarly, when designating a healthcare agent, ensure that their interests align with your healthcare preferences to prevent any conflicts of interest that may arise during medical decision-making.
Such conflicts of interest could disqualify them from participating as part of the advisory team discussed earlier.
8. Candidate Meeting
When meeting with candidates for a healthcare power of attorney or a financial power of attorney, consider discussing the following:
Role
Initiate an open dialogue with your candidate and assess their willingness to assume the role. Additionally, discuss their availability to fulfill the role, as it can be a time-consuming endeavor.
Factors like their geographical location (e.g., city, state/province, country), work commitments, or personal responsibilities may affect their ability to dedicate sufficient time to meet your objectives.
Compensation
Engage in an honest and transparent conversation with the candidate regarding compensation for the services they will be expected to perform. Consider the scope of responsibilities and the estimated time commitment required.
If you haven't provided specific instructions regarding compensation, it may be left for the court to decide. Compensation is often calculated as a percentage of the estate's value and can vary based on the complexity of the estate. In some cases, family members or close friends may be willing to forgo compensation altogether.
9. Documentation
Document your decision-making process and any agreements made as such may be required in future legal proceedings.
10. Review and Reassess
Circumstances change. Periodically review your decision to ensure it remains appropriate. Be willing to make changes, if necessary, to protect your health and estate.
FINAL THOUGHTS
A Power of Attorney is a powerful legal document that serves as a shield against life's uncertainties, empowering a trusted individual to advocate on your behalf. It's not about relinquishing control but about constructing a safety net to protect your interests in various situations, from medical crises to complex financial matters.
Whether it's a Healthcare Power of Attorney or a Financial Power of Attorney, these documents symbolize trust and your commitment to securing your future. It allows you to designate someone to make critical decisions when you cannot.
Choosing the right power of attorney involves self-assessment, identifying priorities, complying with legal requirements, partner and family consultation, and considering potential conflicts of interest. It's crucial to meet with candidates, document your decisions, and regularly review and reassess them as circumstances change.
Ultimately, a Power of Attorney is a versatile and essential tool for managing life's adventures and safeguarding your interests.
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