A financial power of attorney and an advanced healthcare directive can be two of the most important documents that you ever sign. A financial power of attorney permits someone else, called the “agent” or “attorney-in-fact,” to make decisions for the person who signs the power of attorney, called the “principal.”
A power of attorney is only effective when the principal is alive. Once the principal dies, the agent’s power of attorney authority ends. Moreover, a principal is always free to revoke any power of attorney authority that he has granted to his agent.
Once a person attains the age of eighteen, no one can make decisions for him unless that person is his power of attorney or court-appointed guardian. As silly as it may seem, the age of eighteen is the age of majority, and once a person attains that age, he is an adult.
Some people think a spouse can make decisions for you simply because of his/her status as a spouse. This is not the case. For instance, if Mr. Smith owns an IRA and he is mentally incapacitated, Mrs. Smith would not be able to access that IRA unless Mr. Smith executed (signed) a power of attorney in her favor or she is the guardian of her husband.
When clients come to see me, I always tell them that a Will is important, but a financial power of attorney is even more important. A Will is for other people. A Will is only effective after you die, so a Will is not really for you; it’s for those you love.
A power of attorney is for you. The power of attorney permits someone else to take care of you if you cannot take care of yourself.
An advanced healthcare directive is essentially a financial power of attorney but for healthcare decisions. The directive grants authority to someone else (called the “agent” or “proxy”) to make decisions for you. Through an advanced healthcare directive, you can grant someone the authority to access your medical information, which is important given privacy laws.
Over the years, I have had a few clients who I would consider to be good planners contact me about planning for a child of theirs who was going away to college. The child was about eighteen years of age and the parent realized that if something happened to the child when the child was away at college, the parent would not be able to make decisions for the child.
These parents have contacted me and asked that I draft a financial power of attorney for the child. This is a smart move. Now that the parent has a power of attorney, he can continue to make financial decisions for the child.
The parent can still handle the child’s banking, even if the child is perfectly healthy, and if something were to happen to the child—for instance, if the child were to get into an accident—the parent can handle the child’s financial affairs. Furthermore, the parent could make healthcare decisions for the child and access the child’s healthcare information.
As much as none of us would ever want to think about something happening to one of our children, what would make the situation many times worse is being told that you don’t have authority to make important financial or healthcare decisions for the child who now desperately needs your help. Eighteen is what the law considers an adult, so your authority over your child legally ends once he attains the age of eighteen.